The Philippine muscuvado industry may be “kopong-kopong,” (very old) with most farmers being fifth generation producers, as Jun Castañeda, Manager of the Sultan Kudarat Muscuvado Farmers and Millers Corporation (SKMFMC), puts it, but it was only in the mid- 90s when consumers started to take a closer look at muscovado.

It may have been the emerging health consciousness or the urban appreciation of coffee or café culture. Whatever these were, PDAP read the signs well and anticipated the demand, particularly for the organic variety.

SKMFMC is a corporation made up of two farmers’ cooperatives, eight individual millers and several farmers. It is based in President Quirino, a 4th class and considered the most depressed municipality in the province of Sultan Kudarat. Around 429 hectares are planted to sugarcane making President Quirino the third largest producer of muscovado (dark brown unrefined sugar) in the country in terms of land area coverage.

In March 2006, SKMFMC was registered as a corporation after PDAP, under its PRIME (Promoting Rural Industries and Market Enhancement) Program, helped organize and train small farmers and millers on organic sugarcane farming. The emphasis on “organic” was necessary because “if there is heavy fertilization, it is difficult to produce muscuvado,” relates Castañeda.

“There is also an effect on quality. If it is organically-produced and stocked for 10 years, when the container is opened, provided there is no leakage, it still smells pleasant. If it is not organic, the smell is sour and it will easily deteriorate,” he adds.

Working the three shifts

National muscovado production, aside from its being seasonal, has been declining due mainly to expensive production inputs, improper technology, lack of good sugarcane varieties and land conversion. Under PRIME, PDAP identified the need to first shift small farmers from producing conventional sugar
to muscuvado. The second shift was from inorganic farming to sustainable agriculture and addressing the problem of production shortage.

“PDAP had a hard time organizing us. The people said, you just cause a disturbance. Farmers’ attitudes differ. We had to do it slowly,” relates Castañeda, himself a miller, “There is a scarcity in organic fertilizer because the farmers have to produce it themselves, which to them is additional work.”

He spells out the dilemma, “the only way they can guarantee that the fertilizer is organic though, is when they themselves produce it.”

SKMFMC and PDAP realized that despite the farmers’ appreciation of the situation and expressed interest in organic farming – due to educational background and the behavioral hesitance to change what they have been used to – there had to be an investment in capacity building, and more so, on institution building.

With the help of the Philippine Business for Social Progress’ Business Advisory Program (PBSP-BAP), the farmers were trained on organizational management, and now enjoy clearer direction and objectives. PDAP provided technical assistance for the use of financial software for SKMFMC to generate timely reports as an aid to decision-making.

While these took time, farmers started seeing incremental changes, and though these were small, they were necessary. “They saw that the villages producing organic muscuvado had several variety stores, and these are open all-year round compared to the stores in nearby villages which close after harvest,” Castañeda says.

Working with the Asia-Japan Partnership Network for Poverty Reduction (AJPN), PDAP concentrated on catalyzing the third shift – consolidating the small farmers and millers into a corporate entity. This last hurdle was the most difficult. It is one thing to organize farmers and shift them to organic farming, it was yet another to turn them into entrepreneurs.

From farmers to entrepreneurs

After drafting their business plan with technical assistance from PDAP, SKMFMC received a working capital loan worth PhP1.6 million from PDAP’s partner financing institution, Federation of Peoples’ Sustainable Development Cooperative.

PDAP also linked the group with Upland Marketing Foundation, Inc. (UMFI), an NGO providing marketing support services for communities for their processed food products.

At the onset, SKMFMC brought muscovado from its members and non-members alike to meet UMFI’s requirements of five tons. Now it can supply UMFI 22 tons per month, according to Nanette Yanto, Accountant and Officer-in- Charge of SKMFMC’s warehouse.

PDAP and UMFI provided technical support to improve the technology and develop muscovado further, as well as package and distribute the product.

SKMFMC also worked on the documentation, inspection and evaluation of its
ICQS (Internal Quality Control System) to assess the group’s readiness for local and international organic certification. PDAP assisted in securing SKMFMC’s organic certification and also its complying with the Good Manufacturing Practices as well as the Hazard Analysis and Critical Control Point as food safety requirements of the Bureau of Food and Drugs (BFAD) and the Department of Health (DOH).

Now there are only two kinds of muscovado – what is called the “PDAP quality” and “reject quality.” “We have set our own standards that require our muscovado to be sedimentfree. It is already export quality. The proper term here is premium muscovado ,” says Castañeda.

With SKMFMC’s Memorandum of Agreement with four rural enterprising communities (RECS), the volume of muscovadon has steadily increased. The group’s positioning the product as “premium” and the parallel increase in quality allowed SKMFMC to command a good price for the farmers, and prevent fluctuation.

“Before PDAP, the farmgate price ranged from PhP12 to PhP14 per kilo,” recalls Castañeda, “now, it doesn’t get any lower than PhP40 per kilo.”

Creativity in the face of emerging market phenomena

The demand that has always been there escalated. SKMFMC is negotiating for a contract with the United Arab Emirates to initially export 20 tons. Between that and UMFI’s requirement up to 60 tons, the industry in Sultan Kudarat had to respond to a market vacuum and ‘pole vaulting’ – market trends that farmers have not had any experience dealing with.

SKMFMC admits to a struggle that required it to be creative in its engagement. Since the group has successfully increased the price of muscovado, other farmers and millers who are nonmembers have also ridden the wave. Castañeda explains the phenomenon, “They cannot lower their prices from our PhP25 to PhP30 buying price. There is a market vacuum because of the huge demand so some farmers sell outside for PhP32. All we can do is keep improving our quality so they will see the difference.”

The market vacuum also created complacency among the farmers, even some members of SKMFMC, and a slide in quality. “They say, we can sell this anyway, even the dirty muscovado is bought. So why should we risk it? Why should we make a loan? SKMFMC, they said, is too strict.”

But Castañeda is steadfast, “We started it right, we will end it right. Even if we don’t want to offend anybody, we need to do this for the good of the industry.”

Engaging the industry, local government

“Industry” is the operative word. Two years into its incorporation, and despite the admitted operational difficulties normal in an enterprise, SKMFMC was already ready to take on the industry.

It engaged the President Quirino’s local government unit (LGU) in formulating a master plan that will elevate local efforts on a provincewide scale. The drafting of the master plan involved the LGU, SKMFMC, RECs, AJPN and PDAP.

Himself a farmer, Mayor Rodolfo Erese realized that the three barangays (out of 19) producing muscovado in President Quirino were the biggest revenue earners. Convinced of the potential of muscuvado to increase the income of municipality, the Sangguniang Bayan adopted a resolution to support the industry.

“We knew we couldn’t compete if our sugarcane were not organic,” says Mayor Erese, “Now, when muscovado is mentioned, President Quirino comes to mind. We didn’t have prospects of that happening before, but because of PDAP, the LGU came in to support.”

The SKMFMC warehouse stands on LGU property with some equipment purchased as counterpart of the government. With the master plan in place, Mayor Erese is confident that the town will build up the volume of quality muscovado.

“There is a huge market for muscovado but we cannot do much if we are not organized. We have to be organized for the industry to take off, for us to meet the demands of the export market,” Castaneda agrees.

This vision is not far off. “Our production in Sultan Kudarat is 320 tons a month. With the intervention of PDAP, it kept increasing in terms of area,” says Castaneda. “Processing capacity has increased by 30%. That’s another 30% increase in production. If not for PDAP and AJPN before them, this industry would still be sleeping.”