Agriculture Business Week

Cocoa or Cacao(Theobroma cacao) is an important source of income for hundreds of thousands of small-holder farmers in East Asia, and it has been cultivated in the Philippines since the 17th century. During the 1970s, the government encouraged cocoa production but industry growth ceased when the Comprehensive Agrarian Reform Program took effect in 1988 and cocoa estates were divided among plantation workers as part of the land reform act. In addition, the outbreak of the cocoa pod borer pest was unchecked these factors resulted in the degradation of the cocoa estates and a serious decline in the cocoa industry.

Statistics from the Department of Agriculture reveal that in 1990, the area of cocoa planted was about 18,377 hectares (ha), with most of this growing in Davao, Zamboanga Peninsula, Western Visayas, North Mindanao, ARMM, and Caraga. By 2006, this area had declined to less than 10,000 ha. During the same period, reported production fell from 9,990 tons to about 5,400 tons, with two thirds of the production coming from Davao region alone.

As of 2008, the estimated volume of production is 6,000 to 7,000 tons, with more than 95 percent used in the local market. In fact, the country has to import more than 20,000 tons of cocoa bean equivalent (main as powder and also as butter and liquor) to supply domestic confectionery, baking, beverage, and chocolate manufacturing needs.

Cocoa is currently undergoing a resurgence of interest and activity due largely to the impact of the USDA-funded SUCCESS Alliance Philippines Phase II program implemented by ACDI/VOCA and its partner, The Cocoa Foundation of the Philippines (CocoaPhil). The potential expansion area for cocoa is huge, with in excess of 2,000,000 ha of coconut lands highly suited to interplanting with cocoa. The international demand for cocoa beans is growing at about 90,000 tons annually, and Southeast Asian regional grinders need an additional 220,000 tons which they have to import from Africa and other distant areas.

The price of cocoa has risen by 100 percent over the last 18 months. SUCCESS Alliance partners such as MARS, Inc. and the World Cocoa Foundation are actively promoting the Philippines as a new origin cocoa supply, and are strong supporters of cocoa industry development in the Philippines. Cocoa is highly suited to intercropping and mixed farming systems, and can add more than $1,500 per ha of net income from 500 mature trees per year. It is a proven crop in the Philippines, ready for resurrection.

In the Philippines, ACDI/VOCA is helping to create community-based diversified and agro-forestry cropping systems to promote cocoa as a sustainable, environmentally friendly income source for farmers. Under a three-year, $750,000 USAID-funded SUCCESS Alliance Phase I, which ended in September 2005, ACDI/VOCA and partners trained 5,268 smallholder Filipino farmers in methodologies for increasing cocoa yield while encouraging the diversification of income sources. ACDI/VOCA partnered with MARS, Inc., CocoaPhil, the Philippines Department of Agriculture, USAID and the World Cocoa Foundation to form the SUCCESS Alliance.

ACDI/VOCA launched the US$2.6 million Phase II of the SUCCESS Alliance program in August 2006, funded by the United States Department of Agriculture. It has implemented activities in Davao, Western Mindanao, Palawan, North Luzon, Panay, and Bicol, with 10,000 farmers to date.

This program continues to expand upon achievements of Phase I by focusing on improved cocoa production and strengthening the value chain for cocoa stakeholders. This is being achieved through activities that deliver farmer training and extension, establish postharvest processing sites, build capacity in nursery plant production, rehabilitate old cocoa trees, and establish internationally acceptable cocoa bean quality standards for the Philippines. A major thrust is to promote the opportunities and participation of smallholder farmers and SMEs in the cocoa value chain as a means of poverty reduction and economic growth.

ACDI/VOCA and CocoaPhil are delivering an extension package of cocoa rehabilitation to improve the productivity and quality of 400,000 cocoa trees owned by 800 farmers. In addition they will distribute more than 1 million clonal seedlings, train 15,000 farmers in good agricultural practices, establish 30 postharvest facilities, and work with farmers to form groups for market access and development. The SUCCESS Alliance program finishes in August 2009.

A baseline survey of SUCCESS Alliance project areas was completed in mid 2007. The results were very interesting and point to the problems and opportunities for cocoa development in the Philippines. Some 40 percent to 75 percent of farmers surveyed across the regions of Western Mindanao, Davao, Palawan and Cagayan Valley had farm incomes of less than P50,000 per year. Farm sizes were in the range 0.5 ha to 3 ha most commonly, and most farmers planted two or more crops. For cocoa farmers, they often inter-planted or planted on the same land with rice, corn, durian, coconut, cashew, rubber or other fruit trees. Most farmers ferment their beans then sundry them; however, the practices and outcomes are highly variable. There are no cocoa bean quality standards in place, although these have been developed through the SUCCESS Alliance and are ready for industry promotion.

The major challenges for an expansion of the cacao industry as indicated in the Cocoa Roadmap strategy for the Philippines are:
1. Poor market development, fragmented linkages, poor coordination of the market chain, and limited market access for farmers.
2. Lack of cacao market price information and opportunities, and other relevant information.
3. Inadequate technical knowledge and skills of farmers and extension agents
regarding cacao farming systems and practices.
4. Lack of awareness of integrated pest and disease management strategies and methods for cacao.
5. Inadequate and unsustainable control strategy and package against cacao pod borer insects.
6. Inadequate sources and control of improved planting materials. 7. Lack of postharvest facilities, knowledge, and effective smallholder technologies.
8. No existing internationally acceptable cacao bean quality standards in place and enforced.
9. Weak or poorly developed business skills of farmers to manage diversified farming systems.
10. Cacao is not regarded as a highvalue crop by government agencies and thus, receives little support.

The Philippines is well placed as future supplier of quality cocoa beans for local, regional, and international trade markets. In addition, niche market opportunities including Organic, Fairtrade and Rainforest Alliance exist. A conservative target of 100,000 ha of cocoa producing 100,000 tons of cocoa by 2015 valued at $300 million is achievable, and would position cocoa as one of the top three agricultural sector industries in the Philippines.

On a regional level, there is a serious shortage of high quality, fully fermented cocoa beans. International buyers and grinders in Southeast Asia have stated they prefer to buy from the Philippines, rather than import from West Africa, based on cost issues. With cocoa bean quality standards in place, Filipino farmers will virtually be guaranteed a market for their product both domestically and internationally, thus presenting significant opportunity for increased government revenue on a new export item, as well as improved agricultural trade balance.