Land consolidation for economies of scale in agriculture

Land has been on my mind lately because it is becoming central to the conversations that I and the KALAP (Kapatid Angat Lahat sa Agri Program) group have been having with people from several sectors. It figured prominently in a conversation we had recently with Sen. Migz Zubiri as we discussed some possible solutions put forward by members of our group on issues that stand between the Philippines and agricultural productivity.

“You had me at agriculture,” he told us. The good senator describes himself as an agriculturist by birth, education and profession. Hailing from Bukidnon, he knows all too well how a productive land can bring so many benefits. He saw with his own eyes that corporate farming works.

You need to approach agriculture as a business, and for a business to work, you need a business model to follow. And for farming as an industry to become productive, you need to achieve economies of scale.

This much we have threshed out as we go about finetuning KALAP. This Go Negosyo initiative promotes inclusive growth, sustainability, competitiveness and development by integrating MSMEs, small-holder farmers and fisherfolk into the value chain of big-brother agri companies.

We have already forged formal agreements with the DTI, DA, NCIP, NTA, DENR, PCA and NIA last March, and have had several discussions with them, along with the 15 big agri companies that have agreed to become big-brothers – mentors – to small farmers.

In our discussions, it always comes back to scale. When we talk to other countries it becomes apparent that it is the one crucial component that the Philippines lacks, one that can be traced to the flaws in our land reform program.

The senator describes himself as a total believer in land consolidation, and I agree with him. We can only achieve economies of scale if we consolidate our lands. The agrarian reform law, as it stands now, is preventing farmer-beneficiaries from using their land as collateral for loans. That land, for many, is their only access to capital. And for anyone who has ever tried to farm, you know that you need a lot of money to till the land.

Most banks will not likely lend to small farmers because agriculture is often seen as risky. So risky, in fact, that they would rather pay millions in fines than risk billions in what they think is a risky loan. While land is commonly considered as collateral, banks would never touch a CLOA (Certificate of Land Ownership Award, the document given to recipients under the agrarian reform program), given all the restrictions on its sales or disposal. The sad part is, a CLOA is all these small farmers have.

Just put yourself in the farmers’ shoes: you own the land and by rights you should be able to sell it or at least be able to use it as collateral for agricultural inputs. On the other hand, we must protect the spirit of why this land was given to farmers: that is, to make it productive. What use would it be if the land does not serve its purpose?

Why can’t the land be bought by a returning OFW who wishes to come home and become an agripreneur? Why can’t a neighboring farm buy the land and expand so it can increase its productivity? What is preventing cooperatives to aggregate the land so that the farmers – as a group – can achieve scale in the same manner as a big corporation?

The way forward is for farmers to group together: whether by forming strong cooperatives or by integrating into the value chain of a big corporation.

If you fly across the Philippines, you will see a lot of idle land, much of it still contiguous. The natural question would be, how come these lands are not being farmed? How come there are hardly any farms? Why is it that a country like the Philippines, blessed with hectares upon hectares of land, and even thousands of kilometers of coastline, is not assured of food security, nor become an agricultural powerhouse? Why indeed.

From our discussions about the issues of land, several solutions have been proposed in order to achieve economies of scale. The solutions will require a lot of hard work, and I expect many challenges ahead. The work will involve untangling years of bureaucratic red tape, uncovering why one government agency’s functions overlap with another’s – practically clearing out a garage filled with decades of unresolved issues and forgotten decisions.

In fact, if there is one thing that we can agree on with the progressive groups, it is that the lives of our farmers have barely improved, even after the many earnest attempts to implement land reform and throughout the iterations of land reform over the decades. So you have to ask yourself: where did we go wrong?

Land has always been a painful, contentious issue in the Philippines. Former president Marcos tried to address it with land reform when he was president, doing so with the best intentions to alleviate poverty. I believe he was right in pushing for it, and had he the benefit of hindsight that we have today, he would agree that farmers having only a few hectares of land to farm is not the way forward.

The idea is not to abolish land reform but to update it with what we know now, and what we know is this: we need these lands to become productive, and they can only become productive if production achieves scale. We can achieve scale if these lands are consolidated, and they can be consolidated if they can be transferred freely to those who can farm them more efficiently.

There are already proofs of this concept – Lionheart Farms in Palawan and Universal Leaf in Ilocos. In both cases, farmers’ lives were vastly improved.

I don’t know what prodded me to do it, but I brought up the subject of land reform and our KALAP proposals with President Marcos Jr. during our PSAC meeting last week. He listened patiently. He didn’t say yes, but he didn’t say no, either, and that is enough for me