Prospects of Commercial Vegetable Production

It is possible to make money from growing vegetables commercially.

By Arsenio ‘Toto’ Barcelona

The vegetable industry is unpredictable, even when predictions are based on statistical data. Allow me to veer away from a statistical presentation so that I can share with you what comes from my gut feel, as two thirds of my year is spent with vegetable farmers, input suppliers, and traders, and visiting markets. I consider this my research and development (R&D) activity, necessary for Harbest and Known-You Seed Philippines to be on top of business opportunities. The following are my predictions for 2015.

Seed Suppliers

Vegetable farming with
simple farm mechanization using the
WR-801 cultivator from Harbest saves 80
percent of labor costs in high-value farming.
This small machine can do rotavation, plotting, hilling up, weeding, and furrowing, and can quickly form shallow drainage
canals.

The major players for vegetable seeds supply are East-West Seed Co., Allied Botanical, Ramgo, Kaneko, Seminis, the Institute of Plant Breeding, the Department of Agriculture (DA) Research Stations, Known-You Seed Philippines, Harbest, contract growers of open pollinated varieties (OPV) seeds, and unlicensed importers of seeds.

The growing population, diversification of growing areas, tourism growth, and increasing use of hot pepper, bell pepper, and cucumber for processing provide improved market potential and growth for seed companies with new and better varieties.

The seed business is still 80% a trading business. Local breeding is still very limited due to low investment and availability of qualified breeders. Furthermore, our erratic weather conditions do
not allow for the long-term production of seeds. Many varieties are still imported from India, Thailand, Taiwan, Japan, Vietnam, the USA, and Holland. However, the next few years will see more investment in weather-resilient varieties. Allied, Kaneko, and Ramgo have local breeding facilities while East-West and Known-You has a wider international-scale breeding and production of seeds.

Smuggling by small traders is attractive and will continue to attract them to hand-carry or “import,” by courier, seeds from China and Thailand.

Research on varietal improvement for ampalaya, tomato, squash, pole sitao, and cabbage are ongoing, funded by the Philippine Council for Agriculture, Aquaculture and Natural Resources Research and Development (PCAARRD) of the Department of Science and Technology (DOST). Research is also being done on hybridization, disease tolerance, and adaptability to climate change. Overall, the funding provided for research has increased, but we are still behind what Taiwan and Thailand have achieved.

Joni Sanchez enters contracts with subdivision lot owners and those with small farm lots, offering his services in land cultivation, seedling supply, and an instant
vegetable garden package in San Pablo, Laguna and vicinity. Here he is harvesting lettuce in his urban demo farm.

There are also no full-time experts doing the breeding work with public funding. Most of the serious breeding is done by the private sector. The Institute for Plant Breeding is doing its share with Dr. Rodel Maghirang and his State University research partners implementing crop improvement studies, although on a very limited scale. The ease in importing new improved varieties from established seed producing areas still attracts seed companies to do rebranding of bulk imports. This will be the practice for several more years.

Research on organic seeds produced organically won’t be viable for the short-term, as the market for organically grown vegetables is not so strict about using organic seeds. The emphasis of the Asian markets—should there be strong-hearted investors willing to tap the market—is still on the production protocol adhering to organic fertilizers, pest, and disease control. The market is strict when it comes to toxic residues.

Production

1. The investment in new growing areas in the provinces is expanding. Good news about successful vegetable farmers featured in Agriculture Magazine (edited by Zac Sarian) and other publications encourage professionals, OFWs, and young college graduates with inherited land to venture into high-value farming with vegetables. Lettuce, melons, cucumber, Red Lady Papaya, super sweet corn, hot pepper, bell pepper, eggplant, and leafy vegetables are choice crops.

2. Drip irrigation and fertigation technologies from Israel, India, Korea, and the USA will have good potential markets as more of these young, educated farmers taste the good profitability in high-value farming. Educating them on proper systems operations and agronomic technology will provide the competitive edge for input suppliers. Hopefully, we can also claim what the Indians did several years back: that drip irrigation’s widespread application from zero to three million hectares in ten years became the reason for its ‘agriculture miracle.’” These technologies will have a dramatic growth in smallholder farmers’ field applications.

Buttercup lettuce grown with Jain Turbo Aqura drip lines used for irrigation and fertigation. This system saves 70% on labor, 80% of the water used, 30% on the fertilizer used, and produces very high quality
lettuce for the fresh market.

3. Simple farm mechanization will play an important role in improving farm management efficiencies and lowering production costs. The Harbest Agri+Engineering Department handling small hand tractors and shredders is experiencing significant sales growth. This will continue in 2015 as we open up in-house financing schemes as well as credit card installment payments. Government subsidies for their procurement will still be very limited despite the 85%-15% support program of the DA, which in reality benefited only a few.

4. The increasing popularity of natural farming practices such as the improvement of soil conditions using microbial inoculants, composting, the production of bio-organic fertilizers from farm wastes like leaves, manure, and molasses, self-concocted bio-pesticides, fungicides, and vermicast and vermitea concoctions are changing the once-toxic practices of farmers. Andry Lim and friends are doing a good job educating Filipino farmers about natural farming.

5. The Agricultural Training Institute has strengthened its mandate to train vegetable farmers; several years back, their initiatives were mainly centered on rice, and mediocre expertise was provided for vegetables. There are also initiatives from local executives to establish vegetable training centers. Harbest has experienced this growing enthusiasm for better training sessions among mayors after the high productivity experienced by small farmers in the Kabalikat sa Kabuhayan vegetable farmers’ training program, a corporate social responsibility (CSR) program initiated by Henry Sy, Sr. under the SM Foundation, Inc. and implemented by Harbest trainors.

6. The growing awareness of traditional farmers in Benguet and other vegetable growing areas of healthy farming practices—avoiding too much exposure to toxic pesticides and the overuse of chemical fertilizers which acidify the soil—helps them achieve sustainable farming and provides safer vegetables to consumers. This practice will continue to take root as the benefits are felt by the farmers. Harbest Organix has been actively promoting the beneficial use of effective microorganisms (EM-1) in agriculture to farmers nationwide. Governor Nestor Fongwan of Benguet and Governor Alfredo Maranon of Negros Occidental have openly declared their full support for organic vegetable farming among their constituents.

7. The growing number of vegetable farmers producing for localized markets lowers the cost of transportation and lessens post-harvest losses significantly. Although this phenomenon is still in its early stages, it is a very encouraging development. Like in Negros Occidental, the group of Chin Chin Uy now has more than ninety non-government organizations (NGOs) and organic vegetable farmer groups under its umbrella, the Organic Na! Negros Organic Producers and Retailers Association (ONOPRA). They—together with the famous pioneer Mon Peñalosa of Peñalosa Organic Farm—now supply SM and Robinsons Supermarkets with organic vegetables in Negros Occidental.

I foresee more provinces will follow suit. This initiative will be private sector-led, with LGU, DA, Department of Agrarian Reform (DAR), and NGO support. Hectarage planted in traditional growing areas may shift to higher value crops like flowers, something which is happening in Benguet. Due to high cost of transportation and the highly perishable nature of vegetables, the localized production of vegetables will gain more ground in 2015. Opportunities created by tourism Industry growth will further encourage more high-value farmers to invest in tourist-rich areas.

8. The DA through its Regional High-Value Crops Development Program coordinators has been actively implementing interventions like seed production training, agronomic technology transfer, and post-harvest logistic support like the cold-chain and tram lines. Although its long-term benefits have yet to be fully felt by small farmers, its sustainability is maintained as vegetables are now an important item in the high-value crops priority of the DA. We will see more funding for
these interventions.

9. LGUs, the DA, and DAR are also sending agricultural technicians and farmers for training in EM technology to the Kyusei Nature Farming Center in Saraburi, Thailand. They come home and serve as catalysts for other farmers to learn and implement this low-cost yet effective technology.

10. Vegetable gardening and farming will still be the star of rehabilitation work on food security after calamities. The United Nations Food and Agriculture Program (UN-FAO), DA, Department of Social Welfare and Development (DSWD), and other NGOs have provided seeds, implements, fertilizers, greenhouses, and hands-on training in Yolanda, Glenda, and Pablo-stricken areas. The Known-You Seed Foundation of Taiwan has donated more than 5 metric tons of seeds worth PhP20 million to these areas through Known-You Seed Philippines and Harbest. These seeds were distributed to the disaster areas through the Zhu Chi Buddhist Foundation, the Catholic church in Leyte, LGUs, the DSWD, and the DA.

11. As market opportunities expand due to the growing demand for vegetables, competition among input suppliers of fertilizers, pest and disease control products, technology, and other consultancy services providers will heighten. Only the best will survive. Farmers are the most down-to-earth clientele; they only use something when they see good results.

12. Home edible gardening will become more popular among urban residents. The influence of Facebook in encouraging more people to plant at home after seeing the successes of their FB friends, the countless internet sites on agronomic technologies, meal recipe sharing, and educational materials on nutrition provide a lot of encouragement for households to plant vegetables in home gardens, pots, and recycled materials. This will provide more opportunities for garden supply outlets and gardening seed repackers/retailers.

Market

The KSK graduates are being prepared to become reliable suppliers of produce to supermarkets. The SM Food Group actively guides these new batches of agrientrepreneurs by orienting them on the packaging and pricing of high quality vegetables at an SM Supermarket outlet.

1. The growing population, tourist arrivals, urbanization, the migration of the Chinese and Koreans to the Philippines—these are all mouths to be fed, with fresh vegetables. Farmers who can produce quality vegetables and traders who can distribute these in the most efficient way to supermarkets or fresh markets will benefit greatly.

2. Demand for new varieties and new types of vegetables will increase. Lettuce like the Grand Rapid, Lollo Rosa, Romaine, Iceberg head-type lettuce, Arugula, and Xanadu are popular,and are being grown by more farms with drip irrigation and organic inputs. New varieties of eggplant, squash, cucumber, tomato, cherry tomato, bell pepper, daegon radish, leeks, cabbage, broccoli, cauliflower, French beans, leafy greens, mini veggies, sweet corn, melon, watermelon, and honeydew will provide lots of opportunities for specialist farmers. This will attract many young graduates with inherited land and assets to invest in farming.

3. Five-star hotels, resorts, and restaurants have a demand for high-quality vegetables to fill up their menus. Cash payments for their daily requirements to specialist farmers will create a win-win situation. Some of them still practice long payment terms, to the detriment of fresh produce traders and, consequently, farmers. As the first party in the fresh vegetable supply chain, farmers will be pressured to sell cheaper by traders.

Lots of opportunities await those who will invest in greenhouses, drip irrigation, farm mechanization, and the training of staff members on improved agronomic technologies to produce for and supply these clients, as well as the local markets.

4. The competition among the big three food retailers—the SM Food Group, Robinsons Supermarket, and Puregold—to establish branches nationwide is a good development for fresh vegetable suppliers. Although most farmers won’t be able to supply direct, local wholesalers who handle several branches, there are always ready markets for good quality vegetables.

5. The concerted effort of government agencies and parents may finally add that half tomato to the daily diet of each Filipino. It is a national target of the Philippine government’s nutrition program to increase the average per capita consumption of vegetables to 60 kilograms (kg) per year from the current 37 kg. That’s about one tomato weighing 100 grams. To attain the 60 kg. target, we will have to eat an additional half tomato. Sounds doable, doesn’t it? The impact will be great on demand as this represents an increase of 50% in vegetable consumption. At 100 million Filipinos, that means there will be a daily demand for 15 million kilos of vegetables that will have to be harvested from 3,000 hectares of vegetable fields at 5 tons average yield per hectare.

6. Processed vegetables for export will still be a limited market for local farmers. Growth in this sector will not be significant. There will be small processors who will come up with specialized bottled products for the local market. They can provide niche markets for small farmers near their “plant”. The halal market for processed food using vegetables as raw material may provide some opportunities worth looking into.

7. It may be good to convince the Department of Education (DepED) and DSWD to use vegetables in their feeding programs instead of instant noodles and buns which are made from 95% imported ingredients. Local farmers can be clustered to supply several schools in their towns. Students will be fed more nutritious food while the farmers will have a steady source of income.

Conclusion

High quality produce from high quality farmers. KSK training program participants are prepared to become suppliers for the growing urban and tourism demand for high quality vegetables and fruits. Harbest now uses natural farming EM-1 technology from Japan, developed by Terugo Higo, who discovered effective microorganisms. Its Organix Department staff members teach farmers this simple and doable technology so that they can make their own compost, soil conditioner, pesticide, fungicide, and feed supplement. It is also effective as a deodorizer for poultry production and piggeries as well as garbage piles.

As more Filipinos become aware of the nutritional value of fresh vegetables, the demand for good quality vegetables will increase. More urbanites eat raw vegetables now as part of salads. The influx of Chinese and Korean immigrants with investor’s visas as well as the short-stay tourists open up new markets for their preferred vegetables. It is wise for farmers to grow the vegetables the tourists want. This will also provide a better opportunity for our retailers to upgrade the quality standard of vegetables on supermarket shelves.

Although 80 to 90% of fresh vegetables in urban centers are purchased from the wet market or sidewalk vendors, the growing trend of supermarket chains establishing branches in provincial locations will hasten the conversion of the shopping habits of consumers. Instead of buying vegetables from dirty and messy wet markets, more people will be encouraged to buy from cleaner, air-conditioned groceries and
supermarkets.

Vegetable farming will still remain a small-scale farming activity, with lot sizes used for it ranging
from 1,000 square meters to two hectares. As many vegetables require intensive care and are
highly sensitive to weather changes, only the strong hearted will remain in this highly volatile
industry. But mind you, thousands have earned their first million from vegetable farming and
trading.

Unless Filipino businesspersons begin to think and aim for the big time in vegetable farming—to
supply the Asian market for fresh and clean vegetables—farm lots used for vegetable production will remain small. But then again, it may be prudent to start convincing Filipinos to eat that extra half piece of tomato daily.

The Asian Free Trade Area (AFTA) 2015 will not be a big threat to local farmers. The highly perishable nature of vegetables will be its guardian angel. But once transport costs, coldchain costs, and safe technology to extend shelf life is developed to support imports, then these can be a threat. In the short-term, I don’t think our ASEAN neighbors will be able to do that. Maybe China. But it has learned its lesson with carrots.

On the other hand, the Philippines may open up markets for organic vegetables for neighboring countries with winter months. Flying the fresh produce to Beijing, Tokyo, and Seoul might still be viable. Halal processed vegetables may also have potential. Again, all these are just prospects for 2015 unless serious businesspersons will look into them with government support.

At the end of the day, we can say the industry will be robust in 2015, with lots of profit potential
for local growers. Input, equipment, and service suppliers will have niche markets that can provide good profit margins. If you ask me how, my answer will be, “That’s a trade secret…”

Arsenio ‘Toto’ Barcelona is the president of Harbest Agribusiness Corporation and Known-You Seed Philippines, Inc. For more information, inquire at 5 Rosemarie Lane, Barangay Kapitolyo, Pasig City, Metro Manila, or call (02) 671-7411 to 14 and 671-2239, fax (02) 671-2232, email harbest@harbest.com.ph or totobarcelona@yahoo.com.ph, or visit www.harbest.com.ph.

This appeared in Agriculture Monthly’s May 2015 issue.