The Philippine coffee industry (Part 3)

According to the Institute for Development and Econometric Analysis, Inc. (IDEA) latest industry trends, the continuous decline in production shows the lack of incentive in the coffee industry in terms of production. Much of the disincentive comes from prices. Since the country opened its doors to world trade in 1990, surge of coffee beans from Vietnam caused price of coffee to plunge from Php450 per metric ton to PhP180 per metric ton. This affected not just other major coffee producers such as Uganda, but also Philippine producers of coffee. Currently, prices of coffee shows a downward trend, pushing coffee producers to shift toward production of other cash crops, such as banana and pineapples.

Per IDEA, the need to meet demand, therefore, has never become more apparent for the coffee industry. In recognition of the lower production and lower productivity, the government proposed certain measures to help local producers. On top of these measures is the Master Plan for the Philippine Coffee Industry, an industry roadmap that was drafted by the Department of Agriculture (DA). The roadmap focused on High Value Crops Development Program (HVCDP), which aims to increase competitiveness of the coffee industry and to achieve environment-friendly production.

This, in turn, highlighted differences between typical and modern coffee growing, addressed issues on gaps in value chain, promoted good farming and management practices, and offered services such as financing, logistics and research and development. The underlying goal of the roadmap, of course is to improve benefits to coffee farmers, processors, traders and exporters.

Aside from the industry roadmap, the Department of Trade and Industry (DTI) also promoted the Philippine coffee produce in the recent Sikat Pinoy National Food Fair. The DTI offered better strategies to better market coffee, which is assumed to have a competitive advantage relative to other food products. Both programs reflect the government’s desire to reduce and eventually eliminate the need to import coffee. To assess whether or not the roadmap and other government-supported programs have been effective in increasing yield in the coffee sector, we have to look at the changes in this year’s level of production. The US Department of Agriculture, however, predicted that coffee production will remain the same this year and decline in 2014.

Overall, the continuous decline in output reflects the declining productivity of coffee producers. Lower productivity, in turn, is affected by lack of services that coffee producers need to increase and improve their yields. Much of these services, such as financial, logistics and extension services, are supposed to be addressed by the coffee industry roadmap provided by the DA. What will make a difference for the coffee industry, however, is not just the industry roadmap. Implementation of the programs under the roadmap will tip the scales for the coffee industry and will spell how the industry is going to improve in the future. Considering the long history of poor agricultural reforms in the Philippines casts doubt on how well the roadmap will be implemented. A stronger commitment by the government is therefore needed to communicate support to coffee producers according to the researchers of IDEA.

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