The Clustering Approach Guidebook

THE CLUSTERING APPROACH TO
AGROENTERPRISE DEVELOPMENT
FOR SMALL FARMERS:
The CRS-Philippines Experience
A Guidebook for Facilitators

About the cover
Organized clusters can be the key to successful agroenterprise
development. The illustration on the cover represents the eight-
step participatory process where clusters of small scale farmers
become active players gainfully engaging in the dynamic market.
Innovated by CRS-Philippines Agri/NRM Program from the CRS-
CIAT Learning Alliance on Agroenterprise Development, the
process continues and progresses towards the empowerment of
the clusters and the building of new ones.

THE CLUSTERING APPROACH TO
AGROENTERPRISE DEVELOPMENT
FOR SMALL FARMERS:
The CRS-Philippines Experience

A Guidebook for Facilitators

Correct Citation
CRS-Philippines. 2007. The Clustering Approach to Agroenterprise
Development for Small Farmers: The CRS-Philippines Experience.
A Guidebook for Facilitators. Davao City, Philippines.

Published by
Catholic Relief Services – USCCB
Philippine Program

ISBN 978-971-93973-0-4

For further information and feedback, please contact:
Catholic Relief Services – USCCB
Philippine Program
CBCP Building, 470 Gen. Luna Street
Intramuros, 1002 Manila
Philippines

Tel. (63 2) 527 8331 to 35
Fax (63 2) 527 4140
E-mail: crsphils@ph.seapro.crs.org
Website: www.crs.org

This Guidebook is considered as an international public
good. Any part of it may be quoted or reproduced provided
the source is acknowledged and the purpose is non-profit.

CRS-Philippines will appreciate receiving feedbacks on this
Guidebook and copies of any publication which draws on it.

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Guidebook Review and
Oversight Committee

Pedro Terry R.Tuason - Chair
Program Manager, CRS Ph Agriculture and Natural Resource Management
Program

Donato Romulo C. del Castillo – Vice Chair
Program Advisor, CRS Ph Agriculture and Natural Resource Management
Program

Jessan S. Catre - Member
Marketing Project Coordinator, CRS Ph Agriculture and Natural Resource
Management Program

Floro T. Israel - Member
Management Program

Lionel D. Mendoza - Member
Management Program

Joan Cua Uy - Member
Marketing Consultant, CRS Ph Agriculture and Natural Resource
Management Program
Vice President for Marketing, Northern Mindanao Vegetable Producers
Association, Inc. (NorminVeggies)

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Guidebook Writing Team

CRS-Philippines
Jessan S. Catre
Marketing Project Coordinator, Agriculture and Natural Resource
Management Program

Floro T. Israel
Management Program

Lionel D. Mendoza
Management Program

Joan Cua Uy
Marketing Consultant, Agriculture and Natural Resource Management
Program
Vice President for Marketing, Northern Mindanao Vegetable Producers
Association, Inc. (NorminVeggies)

External Writers
Dinah Q. Tabbada
Formerly Community and Institution Development and Extension Specialist
of the EU-GOP Upland Development Project in Southern Mindanao and
Development Communication Specialist of the World Agroforestry Centre
(ICRAF-Philippines).

Alexander U. Tabbada
Formerly Senior Programme Specialist and NRM Research Officer of the
World Agroforestry Centre (ICRAF-Philippines) and Agribusiness Specialist
of the USAID-Growth with Equity in Mindanao Program – Phase 1.

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Contents
Acronyms ix
Glossary of Terms xi
Preface xiv
Forewords xvi
Messages xix
About this Guidebook xxii
How to Use this Guidebook xxiv
Acknowledgements xxv
Part I Agroenterprise as a Strategy to 1
Improve Well Being
The Integral Human Development 2
Framework
The Agriculture/Natural Resource 3
Management Framework
The Agroenterprise Development 3
Approach
Part II The 8-step Clustering Approach to 5
Agroenterprise Development
Step 1 Site selection, partnership building and 13
formation of Working Group
Step 2 Product supply assessment and product 35
selection
Step 3 Market chain study 49
Step 4 Cluster formation 73
Step 5 Cluster plan formulation 89
Step 6 Test marketing 109
Step 7 Scaling up 119

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Step 8 Cluster strengthening 127
Part III Cluster Stories to Tell 141
Story 1 Reaping the fruits of improved timing and 144
quality of deliveries
Story 2 The cluster of hat makers in 151
Maguindanao
Story 3 Organizing and training for the strawberry 154
market
Story 4 Testing the waters with dried fish 157
Story 5 The cluster moves forest coffee (and 160
other farmers) to the market
Story 6 Missing the boat, missing the market 165
Story 7 Small, steady steps to build a marketing 169
enterprise for Maguindanao’s organically
grown, traditional rice
Story 8 Small Impasugong squash farmers 173
moving into the market with the vegetable
industry group in Northern Mindanao
Part IV Lessons Learned 177
References 184

List of Figures
Figure 1 The CRS framework for Integral Human 2
Development
Figure 2 The Agri-NRM Development Framework and 3
Processes of CRS-Philippines

Figure 3 An illustration of the 8-step process of the 8
clustering approach to agroenterprise
development, CRS-Philippines experience
Figure 4 Example of a sociogram used to identify 22
leaders among 10 pre-identified community
members

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Figure 5 A sample of market chain showing the 28
different stages and the corresponding
business support services
Figure 6 An example of a value chain for calamansi, 29
Siay, Zamboanga Sibugay
Figure 7 The ANSOFF Matrix used in assessing risks 43
when deciding for new products & markets
Figure 8 Sample of a market chain for green coffee 51
beans
Figure 9 Market chain map drawn from a corn market 58
chain study using the RMA
Figure 10 Market chain map drawn from a vegetable 58
market chain study using the RMA
Figure 11 Example of a value chain for dried coffee 59
beans
Figure 12 Another way of presenting the margins along 59
the chain
Figure 13 Matrix for Buyer Comparison summarized by 60
the farmers after market survey and visits
Figure 14 A graph of the Nestle Coffee Buying Price 62
over a 1 -year period
Figure 15 Projected Marketing Costs & Returns from 63
Various Buyers in the Coffee Market Chain
Figure 16 Basic structure of a group of clusters 79
Figure 17 Structure of Clusters covering 3 municipalities 84
in 3 provinces collaborating to supply one
market
Figure 18 Cluster Map of Saranga Coffee Farmers 88
Figure 19 Coffee harvest and product delivery calendar 88
of Saranga Cluster
Figure 20 The framework of Agroenterprise 91
Development
Figure 21 Illustration of a sample PQMP that each 95
cluster member must follow to ensure quality
of produce

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Figure 24 Activity Operational Plan five days before 107
delivery
Figure 25 Diagram showing the elements of 114
Figure 22 agroenterprise implementation
Example of a Cluster Map 105
Figure 26
23 An illustration of the Maragusan Coffee
Operational Plan of transformation process of 130
107
a cluster as an organization
Clusters
Figure 27
24 An illustration of the Plan five days of the
Activity Operational strengthening before 131
107
marketing position of a cluster
delivery
Figure 28
25 An illustration of the development of a stable
Diagram showing the elements of 133
114
product supply implementation
agroenterprise base within a cluster
26
Figure 29 transformation process of
An illustration of the improvement of the 130
135
business as an organization
a cluster management capacity of a cluster
27
Figure 30 An illustration of the strengthening of the
growth of a cluster from 131
137
assisted toposition of a cluster
marketing sustainable
Figure 28 An illustration of the development of a stable 133
List of Tables
product supply base within a cluster
Figure1
Table 29 An illustration of the improvement of the
The steps, features, and outputs of the 135
9
business management agroenterprise
clustering approach to capacity of a cluster
Figure 30 An illustrationas developed by a cluster from
development of the growth of CRS-Ph 137
Table 2 assisted to sustainable
Effect on profit of different levels of 26
production, prices, sales and costs
List of Tables
Table 3 Sample matrix used in comparing the values 61
Table 1 offered by buyers and outputs of the
The steps, features, 9
clustering approach to agroenterprise
development as developed by CRS-Ph
Table 2 Effect on profit of different levels of 26
production, prices, sales and costs

Table 3 Sample matrix used in comparing the values 61
offered by buyers

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Acronyms

AE Agroenterprise
AMAD Agricultural Marketing Assistance
Division
A/NRM Agriculture/Natural Resource
Management
BAS Bureau of Agricultural Statistics
BLGU Barangay Local Government Unit
CAG Cluster Advisory Group
CDO Cagayan de Oro City
CIAT Centro Internacional de Agricultura
Tropical (a.k.a. International Centre for
Tropical Agriculture)
COPAR Community Organizing through
Participatory Action Research
CRS-SEAPRO Catholic Relief Services – Southeast
Asia Pacific Regional Office
DA Department of Agriculture
DAR Department of Agrarian Reform
DTI Department of Trade and Industry
GEM-USAID Growth with Equity in Mindanao
Program - USAID
IHD Integral Human Development
Kasilak Kasilak Development Foundation, Inc.
Kaanib Kaanib Foundation, Inc.
Kadtuntaya Kadtuntaya Foundation, Inc.
KRA Key Result Area
LGU Local Government Unit

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MCS Market Chain Study
NFTS Natural Farming Technology System
NGO Non-Government Organization
NSO National Statistics Office
PCEEM People Collaborating for Environmental
and Economic Management in Davao
Foundation, Inc.
PME Participatory Monitoring and Evaluation
PSA Product Supply Assessment
PQMP Product Quality Management Plan
RMA Rapid Market Assessment
SFMP Small Farms Marketing Project
SWOT Strengths, Weaknesses, Opportunities
and Threats
USAID United States Agency for International
Development
USDA United States Department of Agriculture
WG Working Group
XAES Xavier Agricultural Extension Service

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Glossary of Terms

Agroenterprise - refers to a business venture, typically small-
scale, that can be undertaken either on-farm, or a service that
can be used to support other businesses (CIAT ERI Guide 2).
An agroenterprise operates in a defined territory which may be
a barangay (village), municipality, or group of municipalities.

Agroenterprise Plan – a business plan which contains the
Market, Supply, Management and Financial Plans of the
cluster. The AE Plan serves a guide for the cluster and its
members in their production and marketing activities.

Cluster – a group of 5-15 farmers who are committed to
establish a market-linked agroenterprise within a defined
territory.

Cluster Advisory Group - formerly the Working Group at
post cluster formation. The WG farmer-members who joined
the cluster are no longer included in the Cluster Advisory
Group.

Facilitator – refers to Community Organizer, Marketing
Facilitator, Marketing Officer, Agricultural Technologist,
Development Facilitator, and similar change agents charged
with the task of assisting farmers in the areas of organizing,
extension, technical assistance, marketing linkage, and AE
development.

Financial Plan – the component of the AE Plan which reflects
the capital requirements and the projected costs and returns
of the cluster’s business.

Management Plan – the component of the AE Plan which
indicates the management structure, tasks, responsibilities

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and compensations, and policies and procedures of the
cluster.

Market Plan – the component of the AE Plan which indicates
the product/s to produce and market, the sales targets, the
payment arrangements and procedures, and the promotion
strategies.

Marketing - the process of moving products from the point of
production to the point of consumption to satisfy the needs
and wants of customers or buyers at a profit.

Small-scale farmer – refers to a farmer who falls in any of the
following three types of poor as qualified by CRS-Philippines:

1. Resourceful poor - consistently able to sustain at
least a small margin above a minimum livelihood ,
have sufficient resources to fall back on when there
are extraordinary economic or environmental shocks
and to “grow” their livelihood options.

2. Poor - vulnerable to extraordinary economic or
environmental shocks but otherwise able to sustain a
livelihood that meets their basic needs and to
minimally improve their livelihoods.

3. Chronic or ultra poor - resources are at or below a
bare minimum for daily survival, they are extremely
vulnerable all or most of the time and have the
greatest difficulty of all three groups in improving their
situation.

For purposes of developing clusters that can initiate and
pump-prime more AEs, CRS-Philippines worked with
resourceful poor farmers.

Supply Plan – the component of the AE Plan which shows
the suppliers (of the products to be marketed), the estimated
volumes of supply, the quality management processes and

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requirements, the product operational flow, and the materials,
equipment and other needs.

Territorial Approach - a participatory and an area-defined
scheme in rural enterprise development developed by the
International Center for Tropical Agriculture. The territory may
be a barangay (village), municipality, or group of
municipalities.

Working Group – composed of farmers, NGOs, Local
Government Units, local business sector, and Peoples
Organizations. The Group is tasked to conduct Community-
Based Market Research and Product Selection and other
relevant activities. The WG may also be called the Local
Planning Team or the Local Research Team.

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Preface
Over the past several years, a new trend in the marketing of
agricultural produce has emerged driven by the increasing
population of urban consumers with higher incomes and
dynamic lifestyles. The increase in the demand for high quality
and safe produce, coupled with the want for leisure and
convenience, gave rise to the rapid growth of supermarkets,
quick service restaurants and food manufacturers/processors.
Globalization, which made it easier to move a variety of high
quality products across geographical areas, has fueled this
demand and contributed to this dramatic change in the
markets.

With funding support from the United States Department of
Agriculture – Food for Progress Act of 2004, Catholic Relief
Services (CRS) Philippines started implementing in mid 2004
the Small Farms Marketing Project (SFMP) in the following
provinces of Mindanao: Bukidnon, Compostela Valley,
Maguindanao, Zamboanga Sibugay and the upper watershed
of Davao City. All CRS agriculture and natural resource
management programs are guided by the following six
principles: [1] Work with farmers as partners; [2] Treat farming
as a family business, acknowledging that rural communities
are linked to markets and that farm families need income for
off-farm products and services; [3] Focus on farming systems,
supporting diverse production - crops, livestock, trees and
fish; [4] Promote agricultural practices that do not deplete or
damage resources, linking production to conservation; [5] Use
watershed approaches, fostering cross-community
collaboration for resource protection, natural disaster
mitigation, and upstream/downstream cooperation to meet
competing water needs; and [6] Ensure immediate benefits;
invest in long-term production.

CRS Philippines, through the Small Farms Marketing
Project, has organized small farmers into marketing clusters

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to enable them to equitably participate in the opportunities of
evolving dynamic markets. Through the clusters, farmers can
proactively plan their production in cooperation with the big
consolidators servicing these high value markets, manage
quality, and consolidate significant product supply. The
clustering strategy has enabled farmers to introduce reforms
in the marketplace, gradually replacing adversarial
relationship with some traders into collaborative arrangements
with product consolidators and institutional buyers. This has
resulted in innovative supply chains that cut layers towards
the dynamic markets and gave small farmers, acting
collectively, the benefits of more stable markets and/or higher
returns.

This guidebook, “The Clustering Approach to Agroenterprise
Development for Small Farmers, the CRS – Philippines
Experience,” has been designed for Field Facilitators who
have adequate field experience in community development
work. The production of this guidebook was also made in
response to the request of other development organizations to
assist them on how to adopt, adapt and implement
Agroenterprise Development in linking small farmers to
modern markets.

PEDRO TERRY R. TUASON
Program Manager
Agriculture and Natural Resource Management Program
Catholic Relief Services - Philippines

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Foreword

In recent years, CRS programs in Africa, Latin America and
Asia have promoted market driven strategies for poor,
marginalized small farmers. This manual, The Clustering
Approach to Agroenterprise Development for Small Farmers,
the CRS-Philippines Experience, is an exciting new addition to
the best practice guides being developed by CRS.

The manual is a Guidebook for Field Facilitators. It provides a
stepwise practical approach to understanding markets,
identifying market opportunities and then preparing farmers to
supply selected market types. The guide uses novel methods
for clustering farmers and linking them into higher value
market chains that would not have been open to individual
farmers.

This guidebook is valuable for all practitioners. It builds on
existing knowledge, is grounded in a local situation, and adds
new concepts on setting up farmer groups for marketing and
clustering groups to achieve high volume for sales. The
process of developing this guide comes through a strong
partnership between CRS, research, farmer associations and
traders. These partners are essential to make markets work
for the poor farming communities.

A critical part of CRS’ work is finding sustainable solutions for
the poor that provide livelihood pathways out of poverty. This
process includes engaging with markets and playing an active
and innovative role in market chains. This guide provides us
with the stepwise approach to that goal of sustainability. All of
this takes much time and effort but through these types of

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guides CRS staff and partners are better able to facilitate the
process of positive change.

We congratulate the CRS and partner agribusiness team in
The Philippines for the excellent guide. It’s important to
document our work and share it with the broader CRS
community and others engaged in similar work.

Agroenterprise approaches are proving successful
mechanism to lift poor farmers out of subsistence living and
into sustainable livelihoods. This manual is a significant
contribution to CRS’ work with the poor and marginalized.

MARY HODEM
Regional Director
CRS-Southeast Asia and Pacific Region Office (SEAPRO)

SUSAN HAHN
Deputy Regional Director, Program Quality
CRS-SEAPRO

SHAUN FERRIS
Senior Technical Advisor, Agriculture and Livelihood

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Republic of the Philippines
DEPARTMENT OF AGRICULTURE
Office of the Secretary
Elliptical Road, Diliman, Quezon City 1100

Foreword
The task of teaching small farmers and fishers modern and
sustainable technologies and convincing them to organize
themselves into associations or cooperatives so they could expand
into processing and marketing enterprises are enormous challenges
that the Department of Agriculture family cannot perform and
bankroll alone. Thus, we continuously seek the support of concerned
groups and institutions, here and abroad.

In this case, we wholeheartedly appreciate the initiatives of the
Catholic Relief Services and the United States Department of
Agriculture in the packaging and publication of this valuable
document.

Indeed, this guidebook will serve as a valuable reference for
community organizers and facilitators, agriculture technicians and
extension workers in helping organize small farmers into groups or
clusters, link them directly with the markets, and pave the way to
establishing their respective agro enterprises.

We therefore commend the men and women of CRS-Philippines, its
partner NGOs and farmer-leaders who shared their respective
experiences and spent painstaking hours to complete this book,
which we expect will serve its purpose well in transforming farmers
into market-oriented producers and entrepreneurs.

Mabuhay ang CRS at USDA!
Maraming salamat sa inyong patuloy na tulong!

ARTHUR C. YAP
Secretary

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Message
The production of “The Clustering Approach to Agroenterprise
Development for Small Farmers, the CRS –Philippines Experience”
is the result of years of experience and effort by CRS staff and
partners in Mindanao. It started over ten years ago with the idea of
assisting farmers in Mindanao to increase productivity through
improved environment-friendly farming techniques.

As the interaction grew between CRS, the farmers and the other
project stakeholders, the focus of the project evolved from “farmer-
to-farmer” training to “integrated pest management” to “landcare” to
“marketing” to the “clustering approach to marketing”. The current
program continues to incorporate all of these aspects but with an
emphasis on the “clustering approach”. The manual is an attempt to
share this learning process.

Many talented and dedicated people were involved in this effort
starting with the farmers groups and the local government units.
Archbishop Antonio Ledesma actively supported the first successful
“calamansi” projects in the Ipil Prelature. Paul Hicks and Terry
Tuason of CRS led the transformation of the idea into a concrete
proposal and initiative. Joan Uy provided the intellectual framework
for the “clustering” approach which was indispensable to the
program. Danny Ocampo provided steady management support
through rough periods. Our NGO partners - Kasilak, Kaanib,
Kadtuntaya, XAES, and PCEEM - were instrumental in leading the
process of inclusion of and consultation with government at the local
and provincial levels. Senator Ting Paterno and Bobby Ansaldo
helped promote the program among the business community.

Finally, the program could not have succeeded without the support
and encouragement of the Department of Agriculture of the Republic
of the Philippines and the United States Department of Agriculture.

Michael J. Frank
CRS Ph Country Representative

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Message
Philippine agricultural development is key in moving the country
forward and it is widely known that sustained expansion of the
national economy will likewise require sustained growth in the
agricultural sector. Various economic and sophisticated
developmental models have been designed for this although many
times, they remain as such, all theory and speculation.

Translating theory into reality is easier said than done and this is
usually the case in developing countries whose agricultural sectors
are predominantly in the hands of small-scale farmers. As the world
rapidly changes and the dynamics of rural social systems continue
to shift, identifying the appropriate mix of developmental
interventions require patience and innovation.

The Clustering Approach to AgroEnterprise Development for Small
Farmers: The CRS-Philippine Experience goes beyond identifying
the tools for change by integrating, among others, certain essential
management disciplines in the development process.

Drawing from proven and tested countryside developmental
experience, the guidebook is not only deliberate, determined and
instructional; it is also practical, realistic and concise. It is the
perfect companion for the field-extension worker and rural
development planner.

I would like to congratulate all those involved in the preparation of
this excellent guidebook and I assure you of my continued support

Emiko Purdy
Agricultural Counselor

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Office of the Archbishop
Archbishop’s House
P.O. Box 113
Cagayan de Oro City
9000 Misamis Oriental, Philippines
Tel. Nos. (08822) 72-63-04; 72-23-75 (088) 857-1357 • Fax No. (08822) 72-63-05
E-mail address: acdo_chancery@yahoo.com

Message

Throughout Mindanao, on a seasonal or even daily basis, countless
rural households sell their produce at the farmgate to middlemen for
immediate cash, but at relatively low prices. These products range
from the traditional crops of rice, corn, and coconuts to the more
diversified and location-specific commodities like vegetables, rubber,
seaweed, calamansi, coffee, and rural handicraft. At the end of the
day, the products of small farmers and fishermen reach the tables of
consumers through a multi-linked marketing chain that channels
most of the profits to middlemen rather than to the primary
producers.

It is this anomalous situation that the eight-step clustering approach
explained in this CRS guidebook tries to remedy. From actual
experience in pilot areas, this clustering approach has reaped
dividends for many small farmer households—helping them to
gradually transform their production areas into entrepreneurial and
self-reliant communities.

Much study, discipline, and self-organization, however, are required.
The eight steps focus on these prerequisites which can be viewed
more as guideposts for the planned and conscious development of
rural households—clustered together.

+ ANTONIO J. LEDESMA, S.J.
Archbishop of Cagayan de Oro

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About this Guidebook
This Guidebook is published by the Catholic Relief Services –
Philippines primarily, but not exclusively, for Facilitators who
are tasked in assisting small farmers interested to organize
themselves into marketing clusters and to develop their own
agroenterprises linked with the market. It provides the 8-step
process clustering approach that guides Facilitators in
equipping farmers with innovative methods so they become
market oriented in their farming and can actually engage the
markets.

This book has four parts. Part I provides an overview with the
discussion of the CRS Integral Human Development
framework that helps the reader understand the holistic
dimensions of an enabling development process for the poor.
Part II describes the clustering approach comprising a set of
eight activities within a stepwise process that provides
facilitators with knowledge and skills in participatory methods
that enable them to effectively assist farmers build
agroenterprises and engage the market. Tool kits are included
in Steps 1 to 6 to guide facilitation. Part III shares stories from
different clusters, and Part IV presents the lessons distilled
from program experiences and recommendations for future
course of action that can build on the current work.

The contents of this Guidebook are based mainly on the
experiences of CRS-Philippines in assisting farmers develop
markets for their produce and build their agroenterprises,
under its Agriculture/Natural Resource Management Program
with its partner non-governmental organizations (NGOs) and
Local Government Units (LGUs).

This Guidebook took shape in a span of two years during
which time CRS-Philippines and its partners gathered several
times in knowledge-sharing sessions called the learning
alliance. Through these joint learning activities, the steps in

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the clustering approach for agroenterprise development were
clarified and simplified under different situations.

The clustering approach to agroenterprise development for
small farmers is a work in progress. CRS-Philippines hopes
that this Guidebook can lead or contribute to the development
of approaches and strategies towards sustainable
agroenterprises, especially among the small farmers.

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How to Use this Guidebook

This Guidebook is for use by Facilitators of development
service providers such as government agencies, NGOs or
other private sector actors including businesses, cooperatives
and farmers associations that assist small farmers organize
themselves, assess their market opportunities, establish links
with markets, and build their own agroenterprises.
The steps in clustering for agroenterprise development are
presented with accompanying informational materials and
tools to guide Facilitators in the conduct of training and market
visits for farmers, and through the actual “learning by doing”
process in enterprise operations.
The approach is designed to be followed from Steps 1 to 8 in
a systematic process as the farmers go through the market
preparation and engagement for the first time. The sequence
of activities is planned so that the results of the previous step
lead to the next.
When farmers gain marketing experience and move to the
expansion stage (i.e. working with more producers, new
products or higher value markets), they may skip certain steps
and proceed to those appropriate to their immediate needs.
For instance, when an organized cluster decides to market a
new product, it can immediately proceed to Step 3, Market
Chain Study.
The scenarios presented and options taken emphasize the
realities of uncertainty and risk inherent in a business, and
therefore the user of this Guidebook should be flexible in
following the steps according to the needs, capacities and
resources of the farmers and the development service
provider.
The user of this Guidebook is encouraged to innovate.
Feedback on its use is welcome.

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Acknowledgements
The publication of this Guidebook has been made possible through the
generous sharing of resources, time and information by a number of
benefactors and partners, the encouragement from the business sector,
and the trust and confidence of the participants on the CRS process.
CRS-Philippines is especially grateful to the following:

International and National Partners
United States Department of Agriculture Food for Progress, benefactor
of the Small Farms Marketing Project; CRS-Southeast Asia Pacific
Regional Office; International Centre for Tropical Agriculture; The
Philippine Department of Agriculture and its Regional Field Units
Non-Government Organizations
Kaanib Foundation, Inc.; Kadtuntaya Foundation, Inc.; Kasilak
Development Foundation, Inc.; People Collaborating for Environmental
and Economic Management in Davao Foundation, Inc. and Xavier
Science Foundation – Xavier Agricultural Extension Service

Local Government Units
Davao City; Impasugong, Bukidnon; Maragusan, Compostela Valley
Province; Paglat and Gen. SK Pendatun, Maguindanao and Siay,
Zamboanga Sibugay

Business Sector
Northern Mindanao Vegetable Producers Association, Inc.; Vegetable
Industry Council of Southern Mindanao and the institutional buyers,
wholesalers/traders and supermarkets and business service providers
for believing in and supporting the capability of small farmers to do
business with them

The Working Groups and the Agroenterprise Clusters and their
Leaders who journeyed with the staff of the CRS-Agri/NRM and its
partners in evolving the 8-step process in the clustering approach for
agroenterprise development.

The Guidebook Committee and the Writing Team who put all the
significant experiences into this handy, practical and useful form.

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Part I. Agroenterprise Development as a Strategy to Improve Well Being

Part I

Agroenterprise Development as a
Strategy to Improve Well Being

Agroenterprise
Development
IMPROVED
WELL BEING
Agricultural
Extension

Good
Governance

ANRM
Framework

IHD
Framework

INTRODUCTION

Part I of this Guidebook presents the emergence of
Agroenterprise Development as a strategy to improve human
well being. It traces the anchorage of this strategy which was
adopted by CRS-Philippines through its Agriculture and
Natural Resource Management Program to the Integral
Human Development Framework of CRS.

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THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS : The CRS-Philippines Experience
THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS: The CRS-Philippines Experience


THE INTEGRAL HUMAN DEVELOPMENT
FRAMEWORK

The Catholic Relief Services or CRS is the official international
relief and development agency of the Catholic community of
the United States of America. As a general approach, it builds
capacities to improve integral human development and
people’s environment as it aims to: (1) alleviate human
suffering, (2) promote integral human development, (3)
change unjust structures, and (4) promote solidarity. (See
Figure 1 for the CRS IHD Framework.)

Figure 1. The CRS framework for Integral Human Development.

As a pro-poor organization, CRS seeks to enable people to
protect and expand the choices they have to improve their
lives, meet their basic human needs, free themselves from
oppression and realize their full human potential. As pro-
environment, it promotes responsible stewardship of the
resources through support for programs and activities that are
ecologically sustainable and are in harmony with the local
environment. These have guided the development of the
Agriculture/Natural Resource Management (Agri/NRM)
Program of CRS – Southeast Asia Pacific Regional Office.

22


THE AGRCULTURE/NATURAL RESOURCE
MANAGEMENT DEVELOPMENT FRAMEWORK

As a guide in implementing its program, CRS-Philippines
conceptualized an Agri/NRM Development Framework and
Process that is anchored on the IHD Framework. The goal of
the Framework is to improve the quality of life of farm families
through improved livelihood supported by (1) agricultural
development interventions, (2) good governance, and (3)
viable agroenterprise development services (Figure 2).

Policy
advocacy

Good Governance
& Peace
Creation Building Acquisition
of genuine & control of
POs and alliances critical resources

Crop & Improve the well-being
Community
livestock of farm families based Market
improvement (the people we Research
Agricultural Serve) Agroenterprise
Extension Cluster DevelopmentEnterprise
Participatory Participatory
Services Development Service Design and
Farm NRM
Planning Landcare Approach & strengthening Implementation

Figure 2. The Agri/NRM Development Framework and Process of
CRS-Philippines.

THE AGROENTERPRISE DEVELOPMENT
APPROACH

As defined by Chambers and Conway (1992), livelihood
comprises “people, their capabilities and their means of living,
including food, income and assets.” A livelihood is held to be

3
3


sustainable when “it can cope with and recover from stresses
and shocks and maintain or enhance its capabilities and
assets, both now and in the future, while not undermining the
natural resource base”. In line with this definition and
qualification, CRS adopted the Agroenterprise Development
(AED) Strategy to sustainable livelihood development.

Agroenterprise refers to a business venture, typically small-
scale, that can be undertaken either on-farm, or a service that
can be used to support other businesses (CIAT ERI Guide 2).
The AED Strategy brings small holder growers together and
guides their activities towards market-oriented and competitive
farm business operations without necessarily forming a formal
organization as a prerequisite. It combines good farming
practices and business skills for farmers to develop
sustainable production system that can respond to the need
for food security, increased income, and sustainable resource
base.

The CRS-Philippines experience in agroenterprise
development stemmed from the 10-year experience of the
International Centre for Tropical Agriculture (CIAT) in many
collaborative projects in Latin America, Africa and Asia. The
CIAT model which guided the first implementation stage of the
CRS-SFMP uses the “territorial approach” as it develops
community-based agroenterprises operating within defined
geographical areas.

In an analogy presented at the introduction of Part I,
agroenterprise development is one of the branches of the
Agri/NRM tree that is anchored on the IHD Framework. The
other branches of Agri/NRM are (1) agricultural extension,
with emphasis on sustainable farm practices, and (2) good
governance that promotes peoples’ participation in policies
and programs that directly affect their livelihood. These three
branches provide nourishment to the fruits, which represent
the improved well being of the poor.

44

Part II. The 8-Step Clustering Approach to Agroenterprise Development

Part II

The 8-Step Clustering Approach to
Agroenterprise Development

INTRODUCTION

Part II presents the eight steps in the clustering approach to
agroenterprise development that evolved in the course of the
implementation of the USDA-assisted Small Farms Marketing
Project (SFMP) that started in December 2004 and
implemented in five pilot sites in Mindanao by CRS-

5
5


Philippines in partnership with local NGOs and Local
Government Units (NGOs).

The sharing of experiences and the refinement of the
clustering approach were facilitated by the gatherings of CRS-
Philippines with its development partners and farmer leaders
for joint learning called the Mindanao Agroenterprise Learning
Alliance (MAELA). These interactions captured the rich
experiences of CRS-Philippines in developing agroenterprises
in the light of emerging and growing markets, and the
challenge to assist small farmers to become competitive and
significant market players.

CLUSTERING FOR SMALL FARMERS

The highlight of the CRS-Philippine agroenterprise
development strategy is the innovative method of organizing
farmers into small groups called “clusters” within a defined
territory or geographical coverage. This geographical focus
facilitates the partnership building work with local
development partners, like the LGUs, for sustainability. In a
defined territory, the planning and monitoring processes for a
particular farm production system are more focused and more
efficient.

The territory of a cluster can be a sitio (sub-village) barangay
(village), group of barangays, or the whole municipality. In
due time, clusters may expand in membership or coverage, or
may form a network or federation of clusters and cover more
barangays or municipalities, and so on.

Forming clusters signifies a new development in farmer
organizing and marketing set-up. The members in a cluster
agree to develop an agroenterprise and proactively plan farm
production according to a marketing objective. As product
supply units catering to specific quality and delivery
requirements of the buyers, the clusters offer a focus to
attract buyers.

66


Being small groups, clusters are better able to keep pace with
continuously changing market opportunities that require
constant innovations from them in production and postharvest
practices. Moreover, the chance for each member to actively
participate and be heard in meetings is greater than in large
groups.

The clustering method provides a concrete mechanism where
farmers can exercise ownership and control of their
agroenterprise, benefit from it, and thus facilitate the farmers’
empowerment process. The clusters provide the learning
ground for self and group management, a maturation process
that is necessary for farmers to transition successfully into
formal business entities and effectively relate with other
market players and partners.

The clustering approach for agroenterprise development is a
sequential process involving eight steps that prepares
farmers to link with the market, assist them to be effectively
organized into small groups or clusters, and guides them to

77


engage the market with favorable arrangements that improve
their incomes and livelihood.

The first five steps comprise the preparatory activities. This
emphasizes the need for farmers to learn new skills, access
new information, and adopt innovative methods to be able to
identify and respond to market demands and opportunities
given their capacities. Adequate preparation during this
critical business preparation and organizing stage ensures
that a higher degree of success is attained when their actual
marketing starts to take place in Step 6 (Test Marketing).

As shown in Figure 3, the process does not end with the
development and strengthening of the cluster. The cluster
may either return to cluster plan formulation (Step 5) and
review its agroenterprise plan, or initiate the formation of new
and additional cluster (Step 4). Table 1 presents the features
and outputs of the different step.

Figure 3. An illustration of the 8-step process of the clustering
approach to agroenterprise development, CRS-Philippines
experience.

8
8


Table 1. The steps, features, and outputs of the clustering approach
to agroenterprise development as developed by CRS-Philippines.

The
Farmers Step Dura- Activities/Tasks Outputs
“Journey” tion “The Work” “The Milestones”

Getting (1) 2 to 4 • Identify project site • Identified project site for
started weeks • Develop partnerships development support
Site with stakeholders • Established partnership
selection, (government, other with stakeholders with
partnership NGOs & development their representatives
building, organizations, local constituting a working
and business sector, group (WG)
formation farmers • WG provided with
of Working • Organize a working orientation on the
Group group (WG) development project,
(WG) • Convene orientation marketing basics,
sessions and planning participatory research
meetings • WG with a plan to
conduct research

Knowing our (2) 4 to 6 • Assist the WG to • WG/local research team
product weeks organize a local trained on PSA and the
supply Product research team use of the tools
capacity Supply • Provide training on • Research results (info
Assess- PSA on farm assets, skills,
ment • Conduct PSA products, production &
(PSA) and • Undertake a marketing conditions,
Product participatory analysis of problems, etc)
Selection research results, then • List of existing dominant
select product(s) products and farmers
producing them
• Selected products for
further research (i.e.
market chain study)

Understand- (3) 4 to 6 • Provide training to WG • WG trained on MCS and
ing our weeks on MCS the use of tools
market Market • Conduct market visits • Diagrams of market
opportunities chain study (in immediate chains for selected
(MCS) commercial areas) and products linking to
undertake MCS potential buyers with
• Undertake a costs and margins along
participatory analysis of the chain
research results and • Initial market negotiation
consolidate findings with potential buyers
into a report with • Research report
analysis of product
supply capacity
matched with market
opportunity

99


Table 1 continued…
The

Deciding to (4) 2 weeks • Invite farmers growing • Report presented
work the selected products • Identified farmers
together and Cluster for orientation meeting; interested to join the
to organize formation present research report cluster
for market • Provide orientation on • Cluster formed with
competitive- marketing basics and cluster leaders
ness clustering • Basic cluster agreement
• Initiate the formation of – to pool products and
clusters, identification collectively market
of cluster leaders, • Objectives set relative to
conduct organizational agroenterprise
planning

Preparing to (5) 2 weeks • Review commitment of • Cluster planting calendar
engage the cluster members or product harvest
market Cluster (product supply, etc) calendar
Plan • Discuss in detail • Product quality
Formula- production management plan
tion programming • A cluster agroenterprise
(technologies like plan consolidating
NFTS, support market, supply,
services, infra) management and
• Facilitate an interactive financial plans
process of • An operational plan for
agroenterprise planning test marketing
with operational
planning

Taking a leap (6) 4 weeks • Undertake test • At least 4 trial product
marketing activities deliveries
Test • Call cluster meetings to • Performance report to
Marketing assess performance the clusters of every
after every product delivery relative to
delivery, implement cluster plan
adjustments in the plan • Expanded cluster
for improvements agreements, as needed

Moving (7) Continu- • Revisit cluster plan for • Regular product
forward to ing (after scaling up deliveries to buyers
build up our Scaling Up test • Establish business • Innovations (product
business market- operating systems and/or market
ing) • Implement regular development)
product deliveries to • Written business policies
the established and systems
markets; pursue new • Monthly financial and
markets operational reports in
• Call monthly cluster the cluster meetings
meetings to assess
performance

10
10


Table 1 continued…
The

Making it (8) Continu- • Ensure that cluster • Knowledge and skills in
continue and ing (from leaders convene agroenterprise
grow. Cluster cluster regular cluster operations (in the fields
strengthen- formation meetings and of leadership and
ing to 2 undertake cluster organizational
years) assessment development, market
• Facilitate periodic strengthening, product
capability building supply and financial
support: trainings, management)
team building activities, • Clusters progressing in
cluster cross-visits, higher level of maturity
exposure trips, • Networking of clusters;
reflection sessions, etc. formalization
• Promote networking of • Networks in the business
clusters and business community
links
• Organize formal
business entity (e.g.
cooperative)

It is worth noting that the market environment of clusters is
dynamic and CRS experiences suggest that the best results
are attained when the key ideas in the approach and their
application is adjusted to the local circumstances, including
the resources of the farmers and the development service
providers.

The succeeding sections of this Guidebook describe the eight
steps in more detail.

Benefits of Clustering:

To the farmers

1. Better access to markets and better bargaining
power (as an effect of quality, volume, variety and
regularity)
2. Lower cost of doing business
3. Diversified and more predictable markets
4. Better income (as a result of higher price, reduced
losses and higher recovery, more stable markets)

11
11


5. Better relations among growers as a result of
working together and helping one another
6. Good image in the business community
7. Organized way of relating to resource providers
(government, non- government, business groups)

To the buyers

Buyers are always particular about quantity, quality and
delivery reliability. This is where transacting with clusters
can be beneficial due to these reasons:

1. Better compliance with quality agreements
through the cluster’s Product Quality Management
Plan it has formulated and must implement
2. Traceability of both cluster and grower through
product labeling procedures
3. Easier product consolidation work
4. Immediate rewards & sanctions (discipline)
5. Flexibility to provide product preferences
6. Quick response to market feedback/complaints
7. A cluster can give in advance notice of impending
changes in shortages of product to be delivered

To the donors and implementing agencies

1. Efficient use of resources (including services)
2. Wider coverage
3. Equity of participating communities
4. Enhanced production-oriented livelihood,
agriculture and NRM projects
5. Sustainability (post-project)

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12

Step 1. Site Selection, Partnership Building and Working Group Formation

Site Selection, Partnership Building
and Working Group Formation

1.1 PROCESS OBJECTIVES

Through the help of the Facilitator, Step 1 aims to enable the
project to:

1. Determine the specific site for the agroenterprise;
2. Identify and engage institutional partners, such as
Local Government Units, Regional and National

13
13


Government Agencies, Non-Government
Organizations, and Peoples Organizations;
3. Form and orient a Working Group (WG); and
4. Assist the WG in formulating a plan for community-
based research.

1.2 INTRODUCTION

Site Selection, Partnership Building and Working Group
Formation is a community process where appropriate site or
sites and partners for the agroenterprise project are identified,
and a Working Group (WG) composed of producers, local
government units (LGU), non-governmental organizations
(NGO), business sector and other relevant representation is
constituted.

This is also the phase where potential farmer leaders are
identified through rapid appraisal. These leaders are invited to
be part of the Working Group (WG) and to participate in the
upcoming initial activities.

1.3 SELECTING THE SITE

Basis for selection

In many cases, sites for the agroenterprise endeavor can be
pre-identified from among existing project areas, or on the
basis of donor preferences.

Ideally, a potential site for the agroenterprise project should
have the following facilitating or enabling factors:

1. Responsive LGU
2. Presence of good extension services
3. Willing producers
4. Surplus farm products

THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS: The CRS-PhilippinesExperience
14
14


5. Favorable social conditions (peace and order,
community awareness)
6. Presence of potential partners or related projects such
as agriculture, natural resource management,
landcare, or community development

The presence of more of these factors would facilitate the
development of an agroenterprise.

At the minimum, willing farmers who have products that can
be marketed can let an agroenterprise endeavor begin.
However, this will require so much facilitation for clustering,
capacity building, operationalizing and networking.

Geographical Focus

The site can be a sitio (sub-village), barangay (village),
municipality, or a group/combination of each.

In a small area, like the sitio or barangay, the focus can be on
understanding the local marketing system and identifying
problems and bottlenecks that can be addressed through
interventions in the local economy.

Rapid Area Assessment

In order to have a good grasp of the current situation of the
site, a quick survey of the resources, institutions and their
predominant business and production activities will be of help
to the Facilitator. Knowing what and who are in the community
will help him/her in carrying out the assigned tasks.

The following information can serve as a starting point for the
Facilitator in making a rapid assessment of the area prior to a
more extensive information gathering and analysis:

1. Physical resources (land and its use, water
resources, soil, climate, rainfall patterns, cropping
seasons, vegetation)

15
15


2. Community profile (gender, age distribution, number
of farmers, other sectors, household size, social
groupings, educational level, history of collective
action)
3. Infrastructure (roads/accessibility of farm areas,
communications, electricity, water systems)
4. Business activities/services (business
establishments, markets, business service providers,
credit services both formal and informal)
5. Development assistance (NGOs, political structure,
government policies and programs for the agriculture
sector).

The above information can be generated by direct observation
or by reviewing secondary sources such as the barangay or
municipal profiles and development plans, LGU reports such
as those in the Municipal Planning & Development Office
(MPDO), the Municipal Agriculture Office (MAO), the
Municipal Economic Enterprise Development Office
(MEEDO), the Municipal Engineering Office (MEO), and other
relevant offices.

1.4 BUILDING PARTNERSHIPS

This is the continuing process of linking with and engaging
relevant institutions or organizations to support the
agroenterprise development undertakings. For example, the
Barangay Development Plan (BDPs) of Barangay Local
Government Units (BLGUs) can be the entry point for
agroenterprise projects especially when these are consistent
with, or part of the agricultural development component of the
BDP. Moreover, barangay officials, such as the Barangay
Chair and the Committee Chair on Agriculture, can provide for
the relevant local policy and program support.

At the level of the Municipal LGU, partnership can yield more
support and counterparts, such as human resources,
infrastructure, logistics (i.e., hand-held radios and
transportation services), and policies. These can be provided

16
16


by the office of the Local Chief Executive, the MAO, the
MEEDO, the MEO, the MPDO, and the offices of relevant
Sangguniang Bayan (Municipal Council) Committees.
Links with other institutions and organizations operating in the
barangay, municipal and provincial territories (such as
producers, business sector and church) can also be
established.

The process of building partnerships can be initiated through
courtesy calls and meetings leading towards a consultation
among identified partners. The active partnership begins with
the establishment of a Working Group (WG).

1.5 FORMING A WORKING GROUP

During the community consultation, the Facilitator draws out
the current situation related to farmers’ production and
marketing, available resources, and existing programs of
NGOs and LGUs. From the discussions, he/she leads the
participants to a consensus on issues pertaining to farm
productivity and incomes.

Addressing the above issues realistically needs a multi-
pronged approach which can be led by the WG.

Role and lifespan of the WG

The WG is an adhoc body organized to provide leadership in
the gathering of information that can help in product selection
(Step 2), in conducting market chain studies (Step 3), and in
forming cluster (or clusters) of farmers for agroenterprise
development (Step 4). Immediately after cluster formation, the
WG transforms itself into a Cluster Advisory Group (CAG) that
will provide assistance in formulating and implementing an
agroenterprise plan (Steps 5-7).

Beyond the above tasks, the WG (and eventually the CAG),
can take an active role in utilizing the partnership as a
mechanism to promote and develop the sharing, coordination

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17


and complementation of local programs and resources
towards a common goal.

Composition of the WG

A WG may be composed of representatives from the MAO,
MEEDO, NGOs, business sectors, farmers and people’s
organization (PO). WG membership ranges from 10 to 15
individuals, at least two-thirds of which are farmers.

Members of the WG should meet at least once a month to
discuss updates and coordinate activities.

To ensure the representation of farmers in the WG, the
Facilitator must take extra effort to identify potential farmer-
leaders.

(Refer to Facilitator’s Tool Kit No. 1 for the standards used in
identifying farmer-leaders to be involved as members of the
WG.)

Identifying local leaders for the WG

The Sociogram method can be used to identify indigenous
leaders (male and female key persons and/ or opinion

18
18


leaders) in the community who can facilitate the change
process.

(Refer to Facilitator’s Tool Kit No.1 for a guide in using the
sociogram.)

1.6 ORIENTING THE WORKING GROUP ON
MARKETING

Immediately after its formation, the WG undergoes an
orientation on the basics of marketing. This includes the
definition and importance of marketing to the farmers, the
concept of supply and demand, marketing strategies/mix (the
4 Ps), types of market, and the market chain.

(Refer to Facilitator’s Tool Kit No. 1 for the Session Guide for
the Orientation on Marketing.)

After the orientation on marketing, the WG agrees on the
schedule of the training on product supply assessment that
will be undertaken in Step 2.

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19


Facilitator’s Tool Kit No. 1

A. IDENTIFYING LOCAL LEADERS

Standards used in selecting farmer-leaders

Selection standard for leaders, men and women, may include,
but not limited to the following:
1. Farmer producer
2. With experience in marketing farm products T
3. Respected
4. Aware and concerned about the community issues and
needs O
5. Believes in the stake and power of communities
through participation O
6. Good communicator: good listener, can express well
and open to ideas
L
Using the Sociogram Method in identifying local leaders

How to Use the Sociogram
K
The sociogram is especially useful in analyzing social or peer
relationships. It gives the Facilitator an idea of how a member
of a community or cluster is viewed by her/his peers in terms
I
of leadership, trustworthiness, approachability and in other
similar qualities. T
Spot potential leaders you can invite later to join the Working T
Group, following the basic steps below. You may revise these
steps depending on specific or bulk of information needed and
the number of respondents you can manage. Just make sure
you maintain gender inclusiveness.
1. Gather at least 20 respondents, 10 men and 10
women. Give each one two (2) small sheets of paper.
Make sure each has a pencil or ballpen.
2. Ask them to write their names on the topmost part of
each paper provided to them.

20
20


3. Ask them to discreetly write on one piece of paper the
names of one (1) man and one (1) woman from the
community whom they mostly approached for advice
or opinions. Please emphasize that their choices
should come only from their community.
4. Collect the answers and proceed to the next question.
5. Ask them to discreetly write on one piece of paper the
names of two people (one man and one woman) from
their community whom they trusted most. Emphasize
that their choices should come only from their
community.
T
6. Collect the answers and thank the respondents for
cooperating.
O
7. Classify the responses corresponding each of the two
questions asked.
O 8. Make a sociogram of the responses to show who
among the names were frequently most approached,
L or most trusted (and other qualities).
9. Make a sociogram of the results. (Refer to Figure 4 for
the example.)
K 10. Spot the two most approached men and women and
list down their names. Similarly, spot the two most
trusted men and women and list down their names.
I This gives you eight potential leaders.
In case a person is chosen as most approached and
T most trusted by a respondent, give him/her a point for
T each quality.
11. Develop a tool to further assess the above potential
leaders in terms of leadership behavior (may be a
matrix of leadership qualities or standard using a 3-
or 5-point-scale from poor to excellent.

21
21


Man Man
Mario Ramon

Woman
Woman
Bilma
Lisa Man
Armando
T
Man
Rolando O
Woman
Woman Teresa
Mila O

L
Man Woma
Woman
Nicasio Minerva
n
K

I
Most approached: Man – Armand; Woman – Bilma
Most trusted: Man – Ramon; Woman - Teresa T
T
Figure 4. Example of a sociogram used to identify leaders among 10
pre-identified community members.

THE CLUSTERING APPROACH TO AGROENTERPRISE DEVELOPMENT FOR SMALL FARMERS: TheCRS-Philippines Experience
22
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B. SESSION GUIDE FOR THE ORIENTATION ON
MARKETING

Session Objectives

At the end of the session, the members of WG will be able
to:

1. Define marketing;
T 2. Articulate the effects of market related factors on
farmer’s profit;
3. Explain the relationships of supply and demand and
O the factors affecting them;
4. Describe the market chain and the participants/actors
O involved;
5. Discuss value chain and how farmers earn from value
addition through participation in the chain;
L 6. Articulate the 4 P’s of marketing, competition and
market positioning; and
7. Demonstrate positive attitude towards marketing

K Time Duration

I 2.0 hours

Resources Needed
T
T Visual aids, marking pens, newsprint/manila paper,
cartolina (for meta cards), adhesives, session and activity
guide, and energizers

Session Procedure

1. Draw out participants’ understanding of Marketing.
Open participation with this statement:

“One enjoyed a cup of brewed coffee this morning
during breakfast because marketing made it

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23


possible to move coffee beans from the farmers
and transform it into brewed coffee for your
consumption.”

Ask participants to individually write on the meta cards
what comes into their mind on marketing based on the
statement. Then synthesize the answers into a
definition. (It will help to arrange the meta cards with
suppliers and buyers on opposite ends, then product,
actors and activities/functions in between).
T
2. Present a matrix for computation where farmers can
appreciate increase in income that is substantial from
market related factors such as price increase of O
product, more volume sold/reduced damage, etc.
(Refer to Table 1.) The red figures are the ones the
O
participants are asked to compute. Deepen
participants with discussion.
L
3. Give lecture and facilitate discussion on supply and
demand with the factors that affect them or are
affected by them.
K
4. Give lecture and facilitate discussion on Market Chain
and Value Chain. Present an example of a value
chain. (Refer to the example on page 29.) Draw out
from participants the ways in which product value
increases as it moves in the chain. Distribute meta T
cards for their individual answers, and synthesize by T
putting together the cards with similar ideas.

5. Give lecture and facilitate discussion on Marketing
Strategy. Draw out from participants what kinds of
questions will be helpful in strategizing using the
marketing mix of product, price, placement and
promotions. (Helpful questions as guide provided
under the topic on Marketing Strategy, pages 31-33.)

6. End the session with an input on competition and
product positioning.

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Session Content/Topics

1. What is Marketing
2. Farming Profitability by being Market Oriented
3. Supply and Demand
4. Market Chain, Value Chain, Value Addition
5. The Marketing Strategy (Target Market and the
Marketing Mix)
6. Competition and Market Positioning

O Topic: WHAT IS MARKETING?

Marketing is the set of activities in moving a product from the
O point of production to the point of consumption at a profit. It is
satisfying customers’ wants.

Given this definition, the work of marketing involves:

a. Understanding what the buyer wants in terms of
K products and the manner of supply to them;
b. Undertaking post-harvest activities such as packaging,
transport, storage, and sale that add value to the
product as it flows from the producer to the buyer
c. Establishing a production-market linkage and
managing communications in between for market
information and feedback

Topic: FARMING PROFITABLY BY BEING MARKET-
ORIENTED

Improving production and yields has positive effect on income.
But increases in price, being able to sell the product and
reducing costs have an even higher impact to farmers’
incomes than just increasing production yield. Farmers’
concern is to earn profits from their sales to be able to cover
the farm costs and to generate earnings for the household’s

2525


consumption needs. To be able to do this, farmers should
have a basic understanding of the market related factors that
influence profits: price, volumes sold and costs. Table 2
shows how changes in these factors affect a farmer’s profit.

Table 2. Effect on profit of different levels of production, prices, sales
and costs. (Adapted from FAO publication, Horticultural Marketing)

Mktg
Squash Base Yield Half Price Price Cost
Case (+10%) Sold (-10%) (+10%) (-20%)
Yield (kg) 1000 1100 1000 1000 1000 1000 T
Quantity sold (%) 80% 80% 50% 80% 80% 80%
Quantity sold (kg) 800 880 500 800 800 800
Price per kg 5 5 5 4.50 5.50 5.00 O
SALES 4000 4400 2500 3600 4400 4000
Production costs 1000 1100 1000 1000 1000 1000
Marketing costs 1600 1760 1000 1600 1600 1280 O
Total costs 2600 2860 2000 2600 2600 2280
MARGIN 1400 1540 500 1000 1800 1720
% of base case +10% -64% -29% +29% 23% L
Note: marketing cost reduction can also apply for production cost reduction.
Base case is farmer produces 1,000 kg of squash; 80% is sold, price is PhP
5/kg, production cost is estimated at PhP 1,000 and marketing cost
packaging, transport, marketing fees) estimated at PhP 1,600.
K

I
Topic: SUPPLY AND DEMAND

The quantity of produce that consumers want to purchase is T
affected by these main factors: price, tastes and preferences T
of the consumers, number of consumers, incomes of
consumers, prices of competing produce, range of products
available to the consumers.

The quantity of that producers supply is affected primarily by:
price of products, cost of production, technology available,
climate and post-harvest capacities.

The price of a produce is determined mainly by supply and
demand. The lower the price, the tendency is the higher will
be the demand. However, as the price goes down eventually

26
26


less will be supplied. Conversely, the higher the price, the
higher is the supply.

1. Supply – is what producers are prepared to sell at a
certain price

2. Demand – is how much buyers are prepared to buy at
the market price

The relationship between what is demanded and what farmers
T are prepared to produce leads to a balance between supply
and demand (referred to as the equilibrium). In practice, this
O point is difficult to attain because the workings of the market is
very dynamic. Many factors influence supply and demand.
Example, farmer’s supply is affected by climate, seasonality,
O road condition, etc. and not just the price.

L However challenging is the situation of farmers, it is important
for them to understand how the market works. And their
objective should be: to be market demand oriented. This
means: producing what they can sell instead of trying to sell
K what they have produced. This implies the importance of
farmers understanding demand, supply and price
movements/trends.
I

T Topic: THE MARKET CHAIN AND VALUE CHAIN
T A market chain refers to a set of linkages between actors
involved from production to the consumers. Actors are those
involved in various functions such as producing, processing,
trading or consuming a particular product, and including those
who provide various services. Figure 5 shows the functions
as the product moves in the market chains with the various
business support services.

27
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