Efforts brewing to perk up Philippine coffee industry

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Saturday, March 12, 2011

IN 2005, an investment banker and real estate developer discovered a 200-hectare agricultural farm in the mountainous town of Alcoy, a two-hour drive south of Cebu City.

Six years later, the same plantation has now become the Philippines' largest coffee farm, located 700 meters above sea level, the area enjoys adequate rainfall and has so far managed to avoid bad weather for the past 15 years.

“It started with a pilot-test for Robusta (the variety used in most instant coffee brands) in a two-hectare land in Alcoy, Cebu in January last year. Now, we’re expecting our harvest in the third quarter of 2011,” said Noel Gonzales, president and chief executive officer of Corporate Holdings Management Inc.


For this project, the company has to spend P66,000 per hectare, or roughly 14 million for 2011 alone. Losses are expected until 2013 but forecast profits will come a year later.

Nonetheless, Gonzales believes that coffee delivers a reliable source of income.

“When global coffee prices went down in the early 2000s due to oversupply, some farmers converted their farms to more productive use or sold them altogether. Currently, prices went up again due to high demand and this presents an opportunity for us Filipinos to get a share of that market,” he said.

A kilo of coffee beans costs around P106 in this week’s trading as traditional tea lovers China and India have gradually acquired the taste for coffee.

But all is not well.

MANILA. The government and the private sector have joined efforts to increase production of coffee to reduce dependence on imports and support local growers. (Virgil Lopez/Sunnex)

Industry group Philippine Coffee Board has since conceded the fight to global powerhouses Indonesia and Vietnam in terms of volume as production even fell short of meeting local demands.

From a top exporter during the latter years of the Spanish colonization to being a current net importer, the Philippines sagging output is influenced by various factors like urbanization, not to mention lack of sufficient government support to rejuvenate the coffee trade.

Total area cultivated with coffee has fallen from 130,000 hectares in 1989 to about 75,000 hectares in 2006, according to the Department of Agriculture.

Filipinos also consume around 64,000 metric tons yearly but the country only produces more than 35,000 MT.

The projected shortfall of over 20,000 MT this year is likely to be captured by Indonesia and Vietnam, whose citizens also inclined to consume the Robusta variety.

Changing lifestyle hikes demand for caffeine fix

In a study by market research group Nielsen last year, around 94 percent of households in the Philippines have coffee and is the second most bought item next to sauces and seasonings.

The product, which was first brought to the country by a Franciscan friar in 1749, is now the most drank beverage inside the household next to water, Nielsen added.

Nowadays, coffee shops led by global giant Starbucks dot Metro Manila and other highly-urbanized cities such as Davao and Cagayan de Oro, validating the study’s observation that Filipinos drink it not just to be awake but also to relax, maintain good health, and socialize.

Coffee is grown in 70 countries, 60 of which are exporters.

Robusta makes up 85 percent of the Philippine coffee production whose output is sourced from plantations in Bataan, Bohol, Bukidnon, Cebu, Compostela Valley, Misamis Oriental, Palawan, Sultan Kudarat, among others.

Arabica, known locally as “Kapeng Tagalog” comprises five percent of total production. This variety bears fruit after two or three years of planting, earlier than the others.

Excelsa comprises seven percent and is resistant to drought while Liberica or the famous “Kapeng Barako” can tolerate and grow in different soil types. It only corners three percent of the country’s local output.

Profits are usually expected after the third year due to zero harvest and production inputs such as fertilizers and fungicides. This has prompted the Agriculture department to advise potential investors to practice intercropping, which is to plant other high-yielding crops such as fruit trees side by side with coffee.

Businessman to introduce coffee camps

In the past, efforts to entice businessmen to invest in coffee production have been uneven but the current government noted that it is high-time to go beyond lip service.

For this year, the Agriculture department said it is set to distribute roughly one million pieces of planting materials, 232 pieces of small farm equipment, and 20 units of production facilities such as screen houses and post-harvest facilities.

Trainings and extension services and quad-media (print, television, radio and online) campaign are also part of the program.

"Both the public and private sector have to shell out between P2 and P4 billion to finance the country's self-sufficiency aim over the next five years," Dante Delima, program director of the department's High Value Crops Development said.

"If we could develop 15 to 20 percent of new coffee plantations (projected at 200,000 hectares), we’d be able to cover our import last year (which is 26,600 MT),” added Marriz Agbon, Philippine Agricultural Development and Commercial Corporation (PADCC) president.

Meanwhile, state lender Land Bank of the Philippines and Sy-led Banco de Oro Unibank, Inc. has formulated loan packages to interested parties. However, loan details depend on the borrower's cash flow, business plan, and fulfillment of required documents.

Covered by the loan assistance are small and medium enterprises and even large companies like Nestle, which buys 80 percent of local harvest.

Tax incentives are also being readied by the Board of Investments and has recently included coffee-growing in the list of 2011 Investment Priority Plan set to be reviewed by the Cabinet and President Benigno Aquino III.

These include an income tax holiday of six years for both start-ups and less developed areas, and three years for expanding businesses, among other benefits.

The Coffee board, for its part, has been active in promoting "Kape Isla," which aims to distinguish local blends, and the “Kapeng Barako” through “Save the Barako” movement. It also helps local entrepreneurs to make a living out of small coffee shops.

Last month, the board’s partner establishment Le Bistro Café, started to sell coffee roasted beans from Sultan Kudarat at the Ninoy Aquino International Airport’s (NAIA) Terminal 1 and 2. The store sourced its coffee from local producers except decaf.

To date, Gonzales’ coffee plantation has become a source of livelihood of farmers around the area, employing hundreds of people at Nug-as village in Alcoy.

“Farmers there used to exist on subsistence farming. Now, the barangay is earning P1.2 million a month from the plantation and usually if it’s salary time, people are in celebratory mood, similar to fiestas elsewhere,” he related.

“This is our commitment to revitalize the Philippine coffee industry, which has been in doldrums for the past several years. In fact, this rainy season, we are going to plant coffee in another 200 hectares also in Cebu. Overall, we want 4,000 hectares of land to be planted with coffee in the next five years,” Gonzales added.

Agro-tourism is also on the businessman’s to-do list.

Soon, tourists can go camping and mountain climbing, and witness the view of farmers busily gathering coffee beans during the harvest season.

“It’s like taking them to a vineyard only they’ll not be picking grapes but coffee cherries,” Gonzales said, as he advised budding coffee growers to carefully study demand-supply movements and opportunities such as intercropping.

“As for me, I’m here for the long-term.” (Virgil Lopez/Sunnex)

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