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AGRIBUSINESS
MANAGEMENT DEVELOPMENT
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| I. | LIMITS OF AGRIBUSINESS |
| Agribusiness here encompasses primary production,
upstream economic activities related to the production and distribution
of all inputs and services used in on-farm production, and downstream
industries involving all of processing, manufacturing, transportation,
and related services involved in transforming raw agricultural produce
into finished products for domestic consumption or export. |
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| II. | SOME EXIGENCIES IN
AGRICULTURAL PRODUCTION |
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1) |
In the Philippines, this is mainly the Comprehensive
Agrarian Reform Law. The basic law was enacted in 1988 authorizing
the government to acquire by purchase all agricultural lands in excess
of five hectares per landowner plus three hectares per landowner’s
qualified dependent, for distribution by sale to tenants, farm workers,
and other qualified landless individuals. Later amendments exempted
lands used for livestock production and aquaculture, and encouraged
private parties to take part in the programme through Agribusiness
Venture Agreements, “Build-Operate-Transfer” Schemes, and
other arrangements. The programme obviously affected the commercial farms when transferring ownership and management of many farming enterprises to relatively inexperienced and ill-prepared farmworkers. Investments were also drastically reduced in these cases. Where commercial farmers were still lined up for acquisition, investments were understandably reduced. In some cases, there was even divestment. These disruptive effects were attenuated only where the acquired and distributed lands were leased back to the former owners or entrepreneurs, or where the farm workers opted for equity participation in the existing corporations. Still, there were cost increases. Another factor is the Food Security Programme. This has placed production of staple crops on high priority, mainly rice and white corn. For these crops, the objective is not only adequacy but sufficiency -- at affordable prices. This could create tension between following a high priority government programme and higher returns in other crops. |
| 2. | Internationally, the Philippines acceded to
the World Trade Organization and the ASEAN Free Trade Agreement. In
addition there are the Brunei-Indonesia-Malaysia- Philippines East
ASEAN Growth Area and the Asia Pacific Economic Cooperation. The main end result of these agreements is a borderless economy. For agriculture and agro-industrial products this obviously calls for global competitiveness, in a few years. For the Philippines, it means even as the new agricultural entrepreneurs are quickly learning to walk, they have to run -- TO EVEN SURVIVE. |
| III. | SOME RESULTING IMPERATIVES |
| 1) | Economically, agricultural enterprise has to
attain better profitability to stay in business, both at home as well
as abroad. But agriculture has to run faster than just to stand still,
otherwise it would weigh down on the country’s growth. To attain
this higher profitability, the government will certainly have to invest
more in terms of roads, irrigation, communications, power, and other
agricultural infrastructure, as well as in research and development
and in extension. But private business will also have to come in with
its own investments in enterprise and human resources development.
This will include market and product development in a farming system
environment. |
| 2) | Socially, this forward movement has to take
place in an environment of smallholder farmers. The first, and time-consuming,
task is organization development. While agriculture does not necessarily
enjoy economies of scale -- in many cases smallholdings have exhibited
yields exceeding those of larger commercial farms -- there are aspects
which are inherently communal (e.g., irrigation, roads, pest and disease
control, market development, etc.). Moreover, community-based management
is indispensable in optimizing resource use under a farming system
since it includes human resource development and integrates operations
all the way to supply and other downstream agreements. |
| 3) | Underneath all these difficulties and threats
lie opportunities. These are found most brightly in agribusiness ventures
linking smallholders and business firms. These could range from contract
growing to joint ventures. Moreover, there are many probable business
partners, particularly among former landowners or agricultural managers,
who have not lost their inclination towards agriculture, and who retain
or can regain resources, particularly capital, technology, markets,
and management which are sorely lacking in many of the nouveau enterprises. |
| IV. | A NEW ROLE FOR AGRIBUSINESS
MANAGEMENT |
| To accelerate enterprise development for
smallholder farmers through linkages with business firms, such
as contract growing and joint ventures. |
| Even if the opportunities for profitable agricultural
enterprises exist and there are willing partners, the linkage will
not take place on its own. Because of initial shyness, timidity, or
even suspicion on the part of the prospective partners, arising from
diffidence and inequality in the past or even bad experience, there
will probably be a need to competently and professionally broker this
union. Owing to exigent time pressure, this will be a pressing need
and meeting this need is the new role of agribusiness management. |
| V. | THE MANAGEMENT TASKS |
| 1. | Organization Development |
| This is the first task, and it needs to be done
for both prospective partners: The business firm for it is taking
on a new role as a landless equal partner; and the smallholders
for they are also taking on a new role as entrepreneurs and as
landed equal partners. |
| a) | The business firm, if previously operating a commercial farm, needs to learn how to co-decide. | |
| b) | The smallholders, whether organized or
not, need to learn single-minded entrepreneurship and clear delineation
of rights and duties of its leaders and members, as distinguished
from the more diffused workings of most cooperatives. |
| The work of organization development must clearly
follow the path of: |
| Ÿ | Value formation | |
| Ÿ | Skills development | |
| Ÿ | Community-based resource management | |
| Ÿ | Institution-building | |
| Ÿ |
Community development |
| The value formation must be focused on: |
| Ÿ | Commitment Business purpose | |
| Ÿ | Accountability Business agreement | |
| Ÿ | Responsibility Entrepreneurship | |
| Ÿ |
Trust between Partners or CART for short. |
| The other component which bears some explanation
is the management of community resources. The basic resources are
usually taken as land, labor, capital and technology, and the usual
approach is to identify constraints to their use. But for joint venture
purposes the approach should be to look for better opportunities for
their use so that the general target is improvement. |
| 2. | Design of Partnership Package |
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There are several, but the basic building block is the smallholder farm. These may be “stand alone” or organized into cooperative farms either through the functional consolidation of the smallholder farms or by the assignment, without transfer, of the land to the cooperative which centrally manages it. The cooperative farm, then, is the prospective
agribusiness partner of the business firm. The partnership between
the cooperative farm and the business firm may take different forms: |
| a) | Contract growing could be a simple arrangement
where the cooperative farm agrees to supply a given volume of
specified farm produce to the business firm following a schedule
at pre-agreed prices or according to some formula for pricing.
A more complex arrangement would have the firm supplying technology
to include planting materials, fertilizers and chemicals; cultural
practices such as crop establishment, plant and fruit care, harvest
and postharvest including processing; and even financing. The
arrangement could go all the way to lease of the land, but this
is officially discouraged. |
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| b) | Joint ventures between the cooperative
farm and the business firm are currently receiving much attention.
These have a number of variations. |
| Ÿ | Variety of commodities. This could
be a single commodity or the range of commodities that could
be commercially produced by the farm. For single commodities,
a contract growing arrangement may be adequate. |
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| Ÿ | Enterprise gestation period. Joint
ventures are more appropriate for long gestations. |
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| Ÿ | Level of integration. This is further
subdivided into: |
| - | joint venture only at downstream level, for example, at grading, processing, and/or marketing; and | |
| - | joint venture from primary production downstream. |
| c) | “Build-Operate-Transfer” is where
a business firm undertakes the financing and construction of some
infrastructure facility. The firm operates the facility for a
period sufficient to recover the investment and earn a reasonable
return. This package does not come under this study because it
does not truly link the stakeholders, unless it eventually leads
to a joint venture. If so, the builder will most probably be the
business firm partner. |
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| d) | Cooperative farms may also enter into management
contracts with outside parties, if this expertise is lacking.
These are not included either for the same lack of linkage between
the stakeholders, unless it is part of a joint venture. If so,
the management expertise would most probably be supplied by the
business firm partner. |
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| e) | Land leasing is the last package but it
is not included either for the same reason, unless it is the initial
phase of a joint venture. |
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From the immediately preceding discussion, it
is evident that the packages need to be custom-fit. Aside from the
strictly business relations that must be spelled out, there are financial
“cookie jars” which may be picked. Furthermore, there are
social acceptances which must be satisfied, not the least of which
is the degree of “comfort” between the prospective partners,
without which no union can work. |
| VI. | THE MANAGEMENT DEVELOPMENT
TASK |
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As mentioned in Section 4 above, a catalyst is needed to bring about the transit of opportunity into enterprise, and that this catalytic action is the new role of agribusiness management. But it was also seen that this new role is very diversified: economist, business and financial architect, politician, and sociologist, but -- the products are animate. The science of this kind of management is still
being formulated, but the art is already being practiced. The need
for this kind of management is pressing, or is it brokerage? Management
education has to catch up. |