An Analysis of the Effectiveness of Specific Government Support Programs to the Local Coffee Production: The Case of Selected Barangays in Lipa City, Batangas

An Analysis of the Effectiveness of Specific Government Support Programs to the Local Coffee Production: The Case of Selected Barangays in Lipa City, Batangas

Cherise Andre Austria & Mikhail Nacino

INTRODUCTION

A global coffee shortage is brewing. The world could face massive coffee shortage is production does not increase to meet its growing demand. According to Luckerson (2015), to keep up with the demand, the global coffee production must increase by forty to fifty million bags in the next decade. With the increasing number of consumption as well as coffee drinkers, especially the Millennials in the emerging markets, are putting even greater pressure on the production. Many studies and statistics show that coffee is the third most consumed beverage in the world, after water and tea. Hence, the high demand of coffee everywhere (Szenthe, 2015).

Philippine Coffee Situation. The coffee shor tage and the increasing demand of coffee is actually an opportunity for the Filipino coffee farmers. Conserva (2017) reported that the Department of Trade and Industry (DTI) encourage the coffee farmers to make use of the ‘opportunity’ to increase their production to cope with the country’s demand. Besides the low prices and climate change, the shortage of coffee supply in the Philippines was due to the low production because of ageing (senile) trees and lack of farmers. The decreasing number of farmers was due to the youths venturing to other sectors instead of “getting their hands dirty” from farming, the lack of interest also contributes to the decrease. The other challenges that the coffee farmers faces are natural disasters which devastates the crops. The consumption of coffee in the Philippines is three million 60KG bags of coffee in 2016 (International Coffee Organization, 2017). In the report by Rappler (2015), a Kantar Worldpanel study showed that every Filipino household buy coffee, more specifically the soluble or instant coffee (3-in-1 varieties) which considered coffee to be one of a household staple even among the lower economic classes. To plug the shortfall in domestic coffee production, Philippines have to import an average of 70,000 metric tons (MT) of coffee beans. This is because local coffee production remains unable to meet the national consumption due to low production and uncompetitive pricing for local coffee products (Cayon, 2016).

Coffee Production in Lipa City, Batangas. The first coffee tree was introduced in Lipa, Batangas in 1740 by a Spanish Franciscan monk. From there, coffee growing spread to other parts of Batangas like Ibaan, Lemery, San Jose, Taal, and Tanauan. Batangas owed much of its wealth to the coffee plantations in these areas and Lipa eventually became the coffee capital of the Philippines. In the late 19th century, Lipa became a famous coffee exporter. Lipa was the first Coffee Capital of the Philippines. In 1880, the Philippines was the fourth largest exporter of coffee beans, and when the coffee rust hit Brazil, Africa, and Java, it became the only source of coffee beans worldwide (Philippine Coffee Board, n.d.).

The glorious years of Batangas Coffee came to a halt when the disease coffee leaf rust hit the plantations in the 1900s. It greatly affected the national coffee production since Batangas was a major producer of coffee. Other factors — the war, cheaper coffee from elsewhere, general loss of interest in farming, ensured the downfall. In the aftermath, an immune-to-rust variety of coffee called Robusta, with smaller beans,was planted in the whole country, where they flourished.

The barako and the Batangueños identity were lost, and bringing back that identity was an important motivation for Batangueños to revive the industry that hailed Batangas coffee back then. To bring back those glorious years may be colossal in the present time, because the dilemma lies in the number of people to cultivate coffee (Cantos, 2013).

Government Policy. Republic Act (RA) No. 7900, An Act to Promote the Production, Processing, Marketing and Distribution of High-Value Crops, Providing Funds, therefore, and for Other Purposes or known as the High-Value Crops Development Act of 1995 defines highvalue crops (HVC) as crops other than traditional ones which include coffee. Also, in RA 7900, Declaration of Policy, it states the declared the policy of the State to accelerate the growth and development of agriculture in general, enhance productivity and incomes of farmers and the rural population, improve the investment climate, competencies and efficiency of agribusiness and develop high-value crops as export crops that will significantly augment the foreign exchange earnings of the country, through an all-out promotion of the production, processing, marketing, and distribution of high-value crops in suitable areas of the country.

Objective of the Programs. With this project, the City Agriculturist Office of Lipa propagated 3,000 barako coffee seedlings and distributed 7,000 assorted planting materials. It also launched training, semi- nars and conventions for new technology in liberica coffee production this year.

OBJECTIVES OF THE STUDY

At the core of this study, the general objective is to analyze the Government Support Programs to the local coffee production in the selected barangays in Lipa City, Batangas. Specifically, the study wants to know more on how effective the input assistance given through the Government Support Programs is towards the current status of the coffee production in selected barangays in Lipa City, Batangas. As part of the analysis, it is focused mainly on determining the level of effectiveness of Agricultural Inputs, Technical Assistance, and Financial Assistance while also looking at both factors and volume of production of the local coffee production. To its end, this study aims to uncover the significance between the relationship of both variables to find out the implications of the Government Interventions and propose possible recommendations that will further develop and improve the program.

REVIEW OF RELATED LITERATURE

Factors Influencing Coffee Production

Agricultural Inputs to Productivity. Low yield was due to low utilization of inputs, low adoption of improved cultivars, poor agronomic practices and high incidences of pests and diseases. High pests and diseases irrespective of high adoption of fertilizer was due to underutilization. Additionally, Low quality hence price and production was due to low level of management like underutilization of inputs, high preference of pests and diseases, poor agronomic practices and poor quality coffee cultivars. Low price hence production was also due to limited domestic coffee consumption, lack of value addition, prohibitive laws restricting farmers participate in marketing and value addition and lack of direct marketing opportunities (Watheri, 2014)

In the study of Minai, Nyairo, and Mbtaru (2014), the explanatory variables found to have significantly contributed to the dependent variable (yield) were access to adequate credit, having some source of cash from other enterprises or employment and consulting extension agents. It was also found out that although price has a positive influence on yields, the impact of price on yields is dampened by the socio-economic factors that farmers finds themselves in. This implies that although good prices encourage farmers to invest in coffee, there is need for an enabling environment in terms of adequate credit, extension services provision and diversification of farmers’ incomes in order to increase coffee yields significantly.

Technical Efficiency. Bhatt and Bhat (2014) also showed that most of the farms are operating at low-level technical efficiency. Farm size and productivity efficiency relationship was found to be non-linear, where large farms tend to have higher net farm income per acre and are technically efficient compared to the small farms. Similar to the study of Ngeywo et al. (2015), both studies show that production is low because the size of the farm is small that is being allocated for coffee production. A similar study done by Dolisca and Jolly (2008), where they evaluate farm level analysis indicate strong evidence that age, credit access efficiency for bean (a traditional crop) and potato (a non- and gender are important factors for improving technical traditional crop) and the factors influencing technical efficiency level for both bean and crop production efficiency level of those farms in Haiti. The results of the study show that farm production involves technical inefficiency which suggests that improvements in technical efficiency represent a greater opportunity for promotion crop production. Dolisca and Jolly (2008) stated that this could be done through promotion of local innovative crop and better use of available resources given existing technology for such crops. By promoting local innovative practices may offer an opportunity to help farmers increase production through adoption of these practices. The important factors for improving technical efficiency are credit access and age. Access to credit encourages technological innovation by acting as an insurance mechanism in agrarian economies. Age wise, it shows that the younger and more educated farmers exhibited higher levels of technical efficiencies.

Government Intervention on Coffee Production. In the study of Thuku et al. (2013), the results show that despite the many efforts put by the government to bring changes in the coffee sector, the results indicates that only commercialization of many millers could spur a change on coffee productivity. In view of this, there is need to reform the cooperative societies which have a major and direct impact on farmers’ access to credit, inputs and the level of returns. This is because this is the only mechanism used to implement the reforms from the government to the coffee farmers. As such there is need to address problems such as poor governance, huge debts and structural problems that plague coffee co-operatives. The huge debts accrued by these cooperatives significantly increases the deductions made by the societies leading to low pay-out to farmer since the proceeds from coffee sales goes to servicing the debts.

Code of Good Agricultural Practices (GAP) for Coffee. The standard particularly that of Good Agricultural Practices (GAP), provides guidance to farmers and other relevant stakeholders through principle-based practices from preplanting operations up to postharvest handling. These practices are focused on ensuring food safety, produce quality, workers welfare and environmental management. To support the coffee industry, the Bureau of Agriculture and Fisheries Standards (BAFS) in collaboration with the experts of the Technical Working Group (TWG), developed the Code of Good Agricultural Practices (GAP) for Coffee.

This GAP for Coffee addresses the essential principles of food safety applicable to primary production through primary processing and packing of green coffee beans. It encompasses relevant provisions of Good Hygienic Practices (GHP) and Good Manufacturing Practices (GMP), as far as applicable, which will help minimize microbiological, chemical and physical hazards associated with all stages of production to processing.

Coffee Production in Philippines.

Rodolfo, Calsiyao, Duclayan, and Himson (2016) stated that Philippine coffee production and exports has declined in recent years due to factors such as low buying price, out-dated production practices, unproductive coffee trees, diversification into other crops, as well as lack of post-production and processing facilities. The results of the study, In terms of the problems encountered, according to the farmers low yield productivity comes first as attributed to different factors such as old coffee trees, no fertilizer application, insufficient weeding activities, high densities of coffee stands and insufficient labor. Old coffee trees decline in terms of its yield productivity due to its multiple branches that are not productive which absorb some of the nutrient required for the fruiting branches. Farmers revealed that they don’t apply fertilizer in their coffee farms which is known “organic by neglect,” coupled with aging coffee trees. Come second is the lack/insufficiency of farm to market road/ transportation problems. Farmers revealed that with this difficulty of transportation they are constraint in doing activities of their coffee farms such as weeding, pruning, mulching and other activities. The third problem encountered was the inaccessibility to market which command better price. The picking and drying of coffee berries affect the final quality of the coffee and also because of the lack of drying facilities. The absence of post harvesting facilities such as dehuller/pulper affects the quality of the coffee beans produced. Inaccessibility to short and long term credit is another challenge. Farmers revealed that because coffee bear fruits once year, they have difficulty in persuading credit institution to lend them money for the improvement of their production activities. Insufficient knowledge on proper harvesting, drying, and storage of coffee beans is recorded a problem. Though they revealed that they have experiences that picking the ripe berries will give them better aroma and flavor, the traditional harvesting which is stripping is still employed. These practices of strip harvesting, improper drying and storage contribute to the degradation of the coffee quality. Like other agricultural venture, there are interventions necessary to deliver better quality and yield productivity. Among the first intervention is the linking of farmers to market which commands better price. They exposed that when market price of coffee becomes high and stable, they will be energized to revitalize their coffee farms.

Agricultural Economics.

Agricultural economics is the study of the allocation, distribution, and utilization of the resources used, along with the commodities produced, by farming. Agricultural economics plays a role in the economics of development, for a continuous level of farm surplus is one of the wellsprings of technological and commercial growth. Agricultural producers are individuals, families, or firms that grow and sell agricultural products (Barkley and Barkkey, 2013).

The field of agricultural economics includes agricultural finance, policy, marketing, farm and agribusiness management, rural sociology, and agricultural law. Agricultural policy is concerned with the relations between agriculture, economics, and society (Barkley and Barkely, 2013; Curtis et al., 2016)

Agricultural Production Economics. According to Kumar (2014), Agricultural Production Economics is a sub-discipline within the broad subject of agricultural economics and is concerned with the selection of production patterns and resource use efficiency so as to optimize the objective function of farming community or the nation within a framework of limited resources. It may be defined as an applied field of science wherein principles of economic choice are applied to the use of resources of land, labor, capital and management in the farming industry.

Production Theory. Production is defined as the process through which some goods and services called inputs are transformed into other goods called products or output (Beattie and Taylor, 1985).

Production function is a technical and mathematical relationship describing the manner and extent to which a particular product depends upon the quantities of inputs or services of inputs, used at a given level of technology and in a given period of time. It shows the quantity of output that can be produced using different levels of inputs (Kumar, 2014).

The classical production function is a purely technical relationship that relates or connects factor inputs and outputs (Koutsiyannis, 1994). It describes the rate at which inputs are transformed into outputs. The production function is as follow:

The theory of the firm is studied in production economics, which is a field of microeconomics. In traditional production economics, firm level decision-making, production, and risk are studied. A number of theoretical concepts are used to understand production economics including profit maximization, cost minimization, marginal cost, and marginal physical product. In recent decades, production economics has examined competitiveness, efficiency, productivity and other related issues. More recently, production economics has evaluated emerging issues such as the impact of agriculture/environmental interactions on the production of farm firms and regulatory reform such as government support programs. The overall objective of production economics is to improve the optimal allocation of resources in the agricultural production process which in turn leads to increased wealth or individual welfare as well as improved policies directed towards the firm (Goddard et al., 2012; Beattie and Taylor, 1985; Doll and Orazem, 1984).

Amartya Sen’s Development as Freedom.

According to Amartya Sen (2001), development can be seen as a process of expanding the real freedoms that people enjoy. Also, Sen (2001) states that development requires the removal of major sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation, neglect of public facilities as well as intolerance or over activity of repressive states. The lack of freedom has a direct relationship to economic poverty, which ultimately deprives people of the freedom to their basic needs. In this context of development as freedom, Sen used poverty as an example of the result of inadequate functioning with lack of entitlements and capabilities which leads to the individuals and households being unable to secure their well-being. Poverty is linked to more than just a lack of income; rather it is recognized to be a lack of a range of capabilities and freedoms which varies in individual and collective circumstances.

Concept of Inclusive Business.

According to Domingo and Bauer (2013), Inclusive Business (IB) is generally defined as commercially viable and profit making private companies in the growth stage; whose core business is designed to address – in scale – pressing social needs of the poor and vulnerable people below the $3 international poverty line, also referred to as the Base of the Pyramid (BoP); by engaging them through the provision of affordable and relevant goods and services and through income and decent work opportunities, in a manner that results in measurable improvements of their living situation; and as a systemic contribution to poverty reduction and inclusiveness for the country/region. The key in this system is the creation of shared value for both the corporations and microentrepreneurs.

This government program is considered an IB because it partners with the beneficiaries, one of which are the farmers, who are also the BoP, to achieve food security and poverty alleviation for the country by providing them materials needed for farming, training to enhance their skills as well as financial aid. By including the vital role of the farmers in this cycle, the government can be able to achieve its goal as well as to improve the lives of the people responsible for this production.

METHODOLOGY

To meet the demands of this study, a descriptive research that made use of quantitative analysis was applied to meet the objectives of this study. Furthermore, the quantitative attributes of the variables were obtained using categorical and interval questions such as yes/no, multiple choice, checklist, and Likert Scale questions.

The objective of this study, as stated before, is to analyze the Government Support Program and its assistance to the farmers in Lipa City. The list of respondents was acquired from the Office of the City Agriculturist on which it detailed who are the farmer beneficiaries. Through survey questionnaires, the farmer beneficiaries were interviewed about their factors of production and volume of production. Furthermore, the level of effectiveness of the government input assistance towards them were assessed to in order to formulate policy recommendation for the further improvement of the state of the coffee production in Lipa City.

Econometric Model. A multiple regression equation was utilized by the researcher in mathematically explaining the relationship of each independent variable has towards the dependent variables. The multiple regression analysis is also used in describing data turned into economic realities that will reflect research’s results.

Equation 2. Regression Equation.

DISCUSSION OF RESULTS

Summary of the Findings. The researcher interviewed a total of eighty-five farmers across barangays San Benito, San Celestino, Sto. Nino and Talisay. Majority (38.8 percent) of them were sixty-five years old and above and the youngest respondent was between the ages of twenty-three and twenty-seven years old. The respondents interviewed were composed of 25.9 percent females and 74.1 percent males. Majority (87.1 percent) of the respondents were married, and the rest were separated, widowed, or single. As for the respondents’ education attainment, 43.5 percent of them finished elementary school, followed by 30.6 percent finished high school, and 16.5 percent graduated college. The rest did have formal schooling at all or took up vocational course. Majority (71.8 percent) of the respondents were both landowners and farmhands themselves, the rest were landowners only, farmhands only or tenants. Apart from the respondents themselves, 36.5 percent of them have more than five family members living with them in their house while only 3.5 percent are living alone or with only one family member. According to the Philippine Statistics Authority poverty threshold category, the results of the study show that 91.8 percent of the respondents were living above poverty and 5.9 percent were living below the subsistence level.

From the data gathered, it showed that source of income was the top motivation for farmers to grow coffee with forty-six percent of the total responses. Come second is livelihood with 22 percent. Third, the inheritance of the coffee farm to the next generation with 14 percent. Apart from coffee, the farmers also grew other crops such as black pepper, banana, lanzones, among others. The average size of land that each of the farmers have is about 1.5 hectares and they have an average of 490 coffee trees. Also, the general conditions of the coffee plantation is conducive enough for the coffee to grow. The damage caused by pests and diseases and calamities and natural disasters to the coffee plantation were moderate. The results of the study also show that an average of two family labor and one hired labor work at the farm, and they work for four days a week and two days a week, respectively. The average salary of the hired labor or a farmhand is about 300 pesos a day. The farmer do not use any machineries or equipment in coffee farming, they preferred to use traditional and simple tools. Also, financial capital is extremely important to coffee farming however, eighty-six percent of the respondents do not have access to financial capital. From the data gathered, on average, a farmer produce about nine jute sacks of fresh coffee cherries in a crop year which is about five jute sacks when the coffee cherries dries. The average farm gate price is P40 per kilo for the coffee cherries with husk, and P100 per kilo for the de-hulled coffee cherries. The farmers usually sell it at the trader in the public market located at the city proper.

Out of the eighty-five respondents that the researchers had interviewed, only thirty-one (or 36.5 percent) participated in the government support programs. For those who did not participate the program, their reason was because of lack of information and knowledge about such programs, as well as no available time to participate. In total, farmers who participated “seldom” acquire agricultural input from the government, and these inputs had “somewhat” helped increase their yield and quality of production But they “always” received technical assistance which “very much” helped them improved their skills as well as their yield and quality of production. On the other hand, none of them received financial assistance from the government. From the acquired inputs, it “moderately” increased the frequency and number of buyers of the farmers’ produce.

From the regression results, it shows that the variables in the input assistance by the government support programs have significant effect to the local coffee production in terms of production yield, quality of production, skills improvement, buyers frequency, and increase in buyers. The OLS and ANOVA results shows statistical evidence that supports this. The implication of the results of each of the models suggest that by rejecting the null hypothesis, the input assistance are significant to the farmers’ production yield, quality of production, skill improvement, buyers frequency, and increase in the buyers of the farmers’ produce in Lipa City.

CONCLUSIONS

After conducting all necessary presentations, interpretations, analysis and statistical tests, this study concludes the following:

Respondents’ Profile. Of the total population interviewed, 64.5 percent or 51 respondents did not participate in the program because they were not aware of the program, and those were aware chose not to participate due to personal reasons. Furthermore, the appropriate categorization of the respondents were based on which barangay they came from. There are also variations in terms of socio-demographic profiles of the farmers such as age, gender, civil status, education attainment, employment, household, and income.

Input Assistance. The input assistance of the government support programs are agricultural input, technical assistance, and financial assistance. The technical assistance indicated the highest total weighted mean which mean that this attribute was the input that they received the most. This is because they often receive more training such as attending seminars and workshops, than the agricultural input because sometimes the government agencies do not have available of the input materials or sometimes they do not have enough to give out to the farmers.

The farmers did not receive any form of financial assistance from the government but the farmers said that even without the financial assistance, their farm are still sustainable because of the agricultural input that were given to them. Only sometimes, when they ran out of such agricultural input, financial assistance will be helpful because then they can buy the materials used for farming without sacrificing their income that is meant for their household. However, when their farms are being damaged by typhoons, among another calamities, that is when they need financial assistance to recover from the loss.

Effectiveness of Input Assistance to Coffee Farmers of Lipa City. Input assistance such as Agricultural Input which is the provision of seedlings and farming materials, Technical Assistance which is conducting of seminars and trainings on efficient farming methods and skills, and Financial Assistance which is providing fiscal aid were seen to have a significant effect to the production yield, quality of production, skills improvement, buyers frequency, and increase in buyers of the coffee farmers and their produce in the selected barangays in Lipa City.

POLICY RECOMMENDATIONS

The findings of this research study served as the basis of the researcher for the recommendations. The researcher takes into consideration that the recommendations should be practical and achievable by individuals and/or government agencies. Time and financial aspect are also considered.

Under the banner programs of HVCDP, The Philippine Coffee Industry Roadmap and the Kapeng Barako Revival Project, it may be considered giving a unique name for the service or proponents of the program for the provision of agricultural production materials, equipment and facilities, technical training, and financial assistance, and others.

The government agencies may consider enacting resolutions that would spread the information of the program especially in those hard to reach areas or barangays in Lipa City to raise awareness for such programs through announcement system per barangay.

The government agencies may also consider enacting resolutions that would provide incentives to farmers to encourage them to participate in the programs.

The frequency of distribution of the agricultural inputs should be made systematic and per batches so that the farmers can regularly receive the materials.

Provision of advanced farming tools to farmers to increase efficiency in farming and to reduce the intensive labor.

Conduct more intensified training to farmers on coffee production, postharvest processing and marketing to further improve yield and quality of coffee beans.

Government agencies may consider establishing demonstration farm especially nursery, plantation and rejuvenation technology for coffee production.

Government agencies can consider linking farmers to lending institutions to finance the production activities.

Link farmers to market with better coffee price.

Conduct a regular follow up to the farmers to monitor their productivity as well as take note of their concerns and needs.

Establishment of network for farmers to communicate their knowledge on coffee prices, and other activities with other farmers so that they all can be well informed on such activities.

Establishment of integrated framework in the promotion of coffee farming the community that would engage the local government and other agencies, farmers, and the locals.