COFFEE REVIVAL; Flogging a dead horse?

From www.malaya.com.ph by Irma Isip

Philippine-Business-News-coffee02172015

A state bank and a non-government organization have assured financing support to give back life to the coffee industry.  It is now behind all Asean countries although late in the Spanish regime, it was the only competitor of Brazil in the export market.

The Peace and Equity Foundation (PEF) and its spin-off investment arm Peace and Equity Holdings (PEH) have pledged P1 billion to the industry from farming to value-adding production over the next five years.

At the same time, Land Bank of the Philippines is launching Coffee 100, a lending window.  Coffee is only the third crop that is to enjoy such special window from the time  since the commodity-based loan program of the state bank was launched in 2013.

Roberto Calingo, executive director of PEF, said the foundation and the holding firm have each allotted P500 million to assist enterprises in five crops, including coffee.  The financial assistance is accompanied by  technical assistance and training.

In time, if the program succeeds separate financial assistance will be provided to increase value.  This may include roasting facilities to make the beans more expensive to the processors and give the farmers additional income.

Earlier, Armin Luistro, secretary of education and former president of De La Salle University created a “coffee university” in barrio Pinagtong-ulan in Lipa.  It has not taken off the ground obviously because the government refused to take notice of his modest effort.

Luistro, a Lipeno himself knew all along the first problem of coffee industry is the fact that 100-year old variety has not been replaced.  But he is secretary of education, not of agriculture.

There are very few commercial coffee farms which are all in Mindanao.

According to Calingo, PEH loans an average of P1 million to an organization with proven three-year track record and a five-year financial forecast .

Other than coffee, the program also targets enterprises in cacao, coconut,  sugarcane and brown rice.

The program seeks to  reach out to 100,000 organizations and has so far assisted 20,000, but Calingo said not all would graduate into commercial-scale production which is limited by small land areas.

Meanwhile, Diosdado Domingo, program officer for Programs Management of Landbank, said the government financial institution has approved Coffee 100 financing program, where Landbank would loan P100,000 per hectare to  coffee farmers   and medium enterprises, corporations and cooperatives.

Domingo said the fund is limitless to those who can prove capability.

The loans are payable in 7 years, with grace of two years (for coffee farm rejuvenation), at commercial rates of 9.5 percent with land as collateral. Cooperatives can take out loans collateral-free.

Domingo said it was only in 2013 that Landbank introduced a commodity-based lending window that started off with bamboo and cacao.

With coffee, he added, the bank also lifted the loan ceiling.

The Philippine Coffee Board Inc. (PCBI) sees the need to give coffee greater access to financing to catch up with the rest of Asean not in volume but in terms of quality.

This year is an “off-year” for the crop.

The country needs about 100,000 tons of coffee beans but produces only 20,000 tons. Processors import the beans.  The shortage also creates an expanding market for imported instant coffee.

From 22,000 metric tons in 2014, coffee output is seen to drop to 20,000 this year due to the cyclical nature of the crop, against 100,000 in demand that grows  by 3 to 5 percent every year principally as a result of bloated population.

Nicholas Matti, chairman of PCBI, said coffee harvest has “on” or bountiful years and “off” years where harvest is leaner, exacerbated by climate change and other factors like drought and typhoons and extreme weather conditions.

The industry is a large P21 billion business.

Vietnam and Indonesia are both in the top five world’s largest producer of coffee.

Matti said in the 1980s, the Philippines was producing 70,000 metric tons while Vietnam came up with only  10,000 to 15,000 mt.

Today, the Philippines produces 20,000 mt while Vietnam produces 1.3 million mt tons a year such that the latter dictates the global robusta market. The Philippines is 60 to 70 percent arabica.

With low volume, PCBI is working on the quality of coffee in the Philippines through its Pick Red campaign where it teaches farmers around the country the proper way of growing, harvesting and processing coffee beans.

PCBI and PEF started their coffee farm visits in time for the harvest season in the Cordilleras, Cavite, Batangas, Bukidnon, Davao and Sulu. PCBI’s next stop is  Cavite, where farmers are now being encourage to produce gourmet or specialty robustas.

Matti said barako and gourmet robusta will attract specialty roasters and command a price higher than the commodity price of P90 to P100 per kilo.

For robustas, Cavite remains  the second largest area for coffee with about 7,000 hectares, down from 10,000 to 12,000 hectares the previous years.

PCBI will continue its thrust in helping Mindanao in particular as more plantations and farmers are planting more  trees. There is an estimated 800,000 new trees that will be planted all over Mindanao’s mountains – Matutum, Kitanglad and Apo. – See more at: http://www.malaya.com.ph/business-news/business/coffee-revival-flogging-dead-horse#sthash.rSnOeg39.dpuf

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