The Business of What if? A missing tooth, amazing plan

clip_image002MANILA: As I begin to write this, Friday, 28 March 2014, we are in the village of Lasip in Malasiqui, Pangasinan in Central Luzon, Philippines; we are on our 3rd day and 3rd ARBO business plan finalization visits, after Rissing Multi-Purpose Cooperative in Bangar, La Union on Wednesday afternoon, and after San Jose MPC in Caba, La Union on Thursday. We are working as consultants under the ARCCESS Project of the Department of Agrarian Reform. ARCCESS is the Agrarian Reform Community Connectivity and Economic Support Services project for the farmers whom the DAR prefers to call the agrarian reform beneficiaries (ARBs); DAR wants the ARBs to be economically better off, to learn market-oriented farming, along the way to decide for themselves.

Farmers or ARBs, following the DAR's initiative, we should want all farmers to be market-oriented. Unless you want them to be poor forever.

Farmers market-oriented? Look, so far in our 6 months of teaching (and learning) from the ARBs in several towns of La Union and Pangasinan, we have been (not) shocked to learn that farmers don't know how to compute for the unit cost of their farm produce, whether rice or corn – in that case, they don't know whether they are earning or losing money. No wonder they're always losing!

And I don't mean just losing a tooth. In the village of Aramal in San Fabian, Pangasinan, where the operator was running the harvester, I picked up a pointed piece of metal near the bund, showed him and asked what it was. It turned out to be a tooth that had broken off while the harvester was cutting the short, standing stalks (in the image, the missing tooth should be right where the 3rd tine crosses the line of teeth). I checked and noted that the tooth was made of cast iron. Did it strike a stone sticking out of the soil? No matter. As in real life, a missing tooth is just an inconvenience, not a cause to stop applying the remaining teeth on the remaining food. The harvesting went on after a fertile pause.

But what do I mean when I say the farmers are always losing?

Like, they borrow from the 5/6 people, loaning say PhP 5,000 and paying it back PhP 6,000 within 1 week or as long as agreed upon. If you think that's usury, wait till you hear the next one.

We have demonized the 20 percenters, Bombays and Filipinos alike. It's bad enough, but in fact, a 20% interest on loan is nothing compared to that charged by some people who supply farm inputs such as fertilizers and chemicals. For those, the interest that farmers have to pay upon harvest, or some 4 months later, oftentimes reaches 40%. That is not usury – that is gross injustice.

How do you feel losing 40% of your produce in a holdup? Instead of only 4%, you pay 40% on your production loan. Really, life is not fair, but this is premeditated, if very slow, murder!

In such an agrarian scenario, if you're a Christian, neither a borrower nor a lender be. Currently, that 40% is what the poor farmers have to go through because they do not realize what they're going through. They just savor the fact that they can get a quick loan when they need one, and you can credit that to opportunity cost. Not only farmers but also the small market vendors fall prey to the lures of the fast loan and the apparent kindness of the loan giver. To many of them, it's a choice between need and none. The choice of losers.

A missing tooth is not the same as a missing business plan. With a missing tooth, the eating continues; with a missing plan, the losing continues.

What we have been teaching the agrarian farmers in our consultancy is how to prepare a business plan. (Later, you might want to read my earlier essay, "Can farmers learn business planning? A feasibility study," 16 March 2014, Frank A Hilario, blogspot.com.). We noted that one of the officers himself of a cooperative did not grasp the need for a what-if scenario – like, what if I rented the hand tractor myself and did not own one? Which calls for costing the service instead of in effect listing as free, because you don't consider the use of your equipment cost. In other words, farmers don't pay themselves working for themselves, and so they don't know the true cost of production and, therefore, their true income.

Team Leader Butchoy Espino is handling the Farm Production Plan and Crop Specialist Dormie del Carmen the CSF Business Plan. I'm documenting all this as Training Specialist, but as I have found out, I am in this as a learner too, especially that I am the General Manager of my own hometown's Nagkaisa MPC in Asingan, Pangasinan, not far from here.

For the Farm Production Plan, Butchoy is asking for data such as on land preparation: what implement a farmer uses to plow, how many passes, how long it takes to plow 1 ha, and what are the expenses, including the fuel and the food. How about the fertilizers and the pesticides? And so on and so forth. Those will all go into the computation of the unit cost of a kilo of palay. Once you know your unit cost, you will know if you're making money or not.

A loan should be part of a business plan. How about the high cost of borrowing 5/6 money and the higher cost of borrowing inputs? They don't include those. So, farmers think they are not losing on their farming – and then they go ahead and wonder why they never become rich despite the fact that they are industrious and, as much as their funds allow, they follow the prescribed agricultural practices such as applying basal fertilizer when planting and spraying as instructed. I wonder if the government technicians ever wonder why most of the farmers don't ever get rich?

It strikes me today that we have come to the stage in our ARCCESS consultancy where farmers will smartly if slowly realize that the way we taught them all those technology options has been designed to lead to this:

Preparing a proper business plan.

Our farmers will now realize that all the technologies in the world of agriculture will not save them – they have to have good business sense if they want to rise from poverty. They need a business plan, whether it's 2 or 20 pages.

Now then, to simplify, I'll translate the business plan into just 2 words:

What if?

Now, let's just talk about the simple rule of cutting your costs where you can.

From what I heard, the highest single cost of rice farming is fertilizing, where a farmer regularly buys 12 bags of fertilizer to apply to 1 ha of riceland; at PhP 1,000/bag minimum, that's PhP 12,000! A lot of money to a poor farmer, or even to his landlord.

Morning today, Saturday, 29 March, 2014, we are again with leaders of the Aramal-Tocok cooperative in Aramal. While we are helping them on their business plans, suddenly one of the farmer leaders says, "If you prepare a business plan, you'll see you'll lose." We all laugh. We know what he means, that you will find out what you have failed to consider when you thought you were winning. So? You prepare another plan. Again, think what if.

Like: What if you the farmer cut costs here and there, including credit? What if you use other methods of farming that minimize your use of fertilizers, whether inorganic or organic, or where you don't need to apply any kind? Market-oriented: What if your coop buys the harvest from you and sell it directly to consumers? If you are market-oriented, you'll find that a what-if plan is always an amazing plan.

What if we don't teach the farmers to ask "What if?" The student does not learn if the teacher does not know how to teach.

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