An Analysis of the Affects of Contract and Non-Contract Marketing Arrangements on the Business Performance of Small-Scale Sugarcane Farmers in Balayan, Batangas

Date

6-2023

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Jeanette Angeline B. Madamba

Committee Member

Jeanette Angeline B. Madamba, Remund Jordan D. Labios, Fitz D. Jimenez, Maria Noriza Q. Herrera

Abstract

The general objective of this study was to analyze the effects of contract and non- contract marketing arrangements of small-scale sugarcane farmers in terms of business performance in Balayan, Batangas. Specifically, this study aimed to (1) describe the socio- demographic profile of the small-scale sugarcane farmers in Balayan, Batangas; (2) discuss the current marketing arrangement of the farmers; (3) identify the factors that are associated with the choice of marketing arrangement of the small-scale sugarcane farmers; (4) assess the relationships and effects of these marketing arrangements on the business performance of the farmers; (5) evaluate the problems encountered by the farmers concerning their participation in the marketing arrangements; and (6) formulate recommendations to address the identified problems.

For this study, the researcher did a face-to-face interview with 299 respondents, selected through stratified random sampling, and were interviewed one-on-one through the guide of pre-tested questionnaires. The study used a descriptive correlational research design with the Chi-Square Test of Independence, Cramer’s V, T-Test, and Multiple Linear Regression Analysis as the analytical tools used.

The socio-demographic characteristics of the small-scale sugarcane farmers in Balayan, Batangas were typically males, in the late middle age group, 47 years old, with 19 years of farming experience. The majority of them had five (5) members per household, entered high school, and had no other sources of income except for the farm income and money they received from their relatives.

In terms of the marketing arrangements, there was one (1) trader who had contract arrangements with 202 small-scale sugarcane farmers in Balayan, Batangas. The study revealed that the contract marketing arrangement was able to help the farmers in terms of assistance with capital, transportation of produce from the farm to processing facilities, farm inputs, manpower, and especially the marketing of their quedans. However, the downside of joining a contract arrangement is that the profitability of the farm would decrease if the capital loans would not be utilized for the farm operations and improvement. Additionally, there were two (2) traders in non-contract marketing arrangements wherein 136 farmers were dealing with the sugar agents and 66 farmers were dealing with Pro-green Agricorp. Unlike the trader in contract, these traders merely provide them with payment for their output. They did not offer agricultural loans, transportation, manpower, or any assistance. Conversely, relative to the contract, the net income gained by the farmers under the non-contract arrangement was relatively higher

which was due to the absence of an interest amount.

The results showed that sex had a weak relationship with the farmer’s choice of marketing arrangement while the government support, farmgate price, presence of other sources of income, and affiliation, had a strong relationship with the choice of arrangement of the sugarcane farmers.

In addition, it was observed that farmers under non-contract arrangements had 10 tons of cane (TC) per hectare, received PhP 138.58 farmgate price per TC per hectare, and gathered PhP 29,295.36 per hectare more than the farmers under contract arrangements. This is attributed to the fact that the total costs of operation were slightly higher in the contract arrangements due to the presence of loan interest charged by the contract trader. In terms of the arrangement’s effect on the business performance, it was revealed that the access to credit and the farmer’s perspective of fairness of the farmgate prices inversely affected the net income, while labor cost and access to farm inputs positively affected their net income. In terms of farm productivity, access to credit and accessibility to farm-to-market roads were discovered to be inversely related while fairness of farmgate price was positively associated.

The problems faced by the farmers were also identified concerning their participation in the marketing arrangement. Aside from the climate-instigated problems like calamity, low yield, and the presence of pests, farmers under contract arrangements usually had lesser problems in terms of capital and no problem in marketing their output. However, farmers lacked the knowledge about managing the finances of the farm as they tend to mix business and personal finances. This became a burden due to the high interest rates offered to the farmers. Along with that is the low farmgate prices offered by the mere contract trader in the area. Farmers who were not part of contract arrangements, on the other hand, experienced challenges in marketing their output since there was no sure market where they can sell their quedan or raw canes.

Given the problems encountered by the farmers, it is recommended that the farmers should only be encouraged to join the contract arrangement if they had no other sources of capital. On the other hand, there should be government-initiated programs that can help farmers learn how to improve the productivity of their farming business using Integrated Pest Management (IPM) to lessen the need for pesticides while decreasing pest problems. The municipal government should also partner with the Department of Science and Technology (DOST) for the introduction of machinery that is suitable for small-scale sugarcane farming activities to solve the lack of laborers. Further, the contract trader should conduct a credit investigation to ensure that the loans were used to improve their farms. Moreover, the pricing arrangement between the marketing of quedans should have a floor price to ensure that the prices received by the farmers were fair. This would encourage farmers to put more effort into farming as this can improve their annual income. The Sugar Regulatory Administration (SRA) should also provide the farmers with Higher Yielding Varieties (HYVs) that would be more resistant to calamities, pests, and other climate-instigated problems. Lastly, Sugarcane Block Farming (SBF) should also be reimplemented to address fragmentation. This problem prevents economies of scale from taking place and therefore, this leads to minimal farm income and low farm productivity.

Language

English

LC Subject

Contract Marketing Arrangement, Incineration, Namamasukan, Non-contract marketing arrangement, Paghahalabas, Pagpapanday, Pakyawan, Small Scale Sugarcane Farmers, Farm produce, Marketing

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2023 M17 Z38

Notes

Best Special Problem (Agribusiness Management)

Document Type

Thesis

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