CONSUMERS’ WILLINGNESS TO PAY FOR ORGANIC RICE

IN GENERAL SANTOS CITY

ANDRE KAREN R. DE LA CERNA

SUBMITTED TO THE FACULTY OF THE

SCHOOL OF MANAGEMENT
UNIVERSITY OF THE PHILIPPINES MINDANAO

FOR THE DEGREE

BACHELOR OF SSCIENCE IN AGRIBUSINESS ECONOMICS

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 ABSTRACT

Consumers’ Willingness to Pay for Organic Rice

in General Santos City

Andre Karen R. De la Cerna

Bachelor of Science in Agribusiness Economics

Andre Karen R. De la Cerna. Consumers’ Willingness to Pay for Organic Rice in

General Santos City. [A paper for Agribusiness Economics 200, Undergraduate
Thesis, 2nd Semester of 2008-2009, under Prof. Aurelia Luzviminda V. Gomez, 64
pages].

The main purpose of the study was to derive the willingness to pay estimates
for organic rice in General Santos City using the Contingent Valuation Method.
Specifically, the study aimed to describe consumers’ awareness regarding organic
rice, to analyze the factors that can influence the WTP for organic rice and to assess &
compare the factors that can affect the WTP for organic rice among income classes.
Quota Sampling Method through Known Groups and purposive sampling were
utilized in this study. The three income classes (high, middle, low) were the known
groups. The study utilized some attitudinal, awareness and demographic factors that
can possibly affect the consumers’ willingness to pay for organic rice and subjected
these factors to a Binary Logistic Regression Model. Of all the factors considered in
the study, only respondents’ past purchase of organic rice, respondents’ willingness to
buy if organic rice is more available, respondents’ awareness regarding pesticide
residues, and monthly household income were found to be statistically significant for
the OVERALL WTP Model; Respondents’ willingness to buy if organic rice is more
available, respondents’ awareness regarding pesticide residues, and household size for
HIGH Income Class’ WTP Model; Respondents’ willingness to buy if organic rice is
more available and respondents’ were found significant in determining MIDDLE
Income Class WTP Model. On the average, respondents, who were willing to pay a
price premium, are willing to pay 31-40% price premium for organic rice. The study
also verified that HIGH Income Class respondents were the ones more willing to pay
and had higher willingness to pay for organic rice compared to the lower income
classes. The findings of this study can serve as inputs for the Local Government Unit
of General Santos City on making or deciding policies and programs for the welfare
of both organic rice farmers and consumers.

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 ACKNOWLEDGEMENT

During the course of my thesis writing and college life, I have been fortunate
in receiving a lot of support and help, in one way or another, from various people and
offices. A one-page acknowledgement is never enough to thank ALL of them.
Financial support from UPMFI is gratefully acknowledged, as without the
monthly stipend, it would have been impossible for me to survive in UPmin.
I am most indebted to Prof. Luz Gomez, my adviser, who not only gave me a
lot of help on this work, but also helped me in some of my finances in the last three
months of my stay in UPmin. It was her who subsidized the binding and printing of
this thesis. Her comments on the draft of this study have contributed greatly to the
successful completion of the final version.
I benefited a lot from the comments and suggestions of my panelists - Mr.
Shuck and Mr. Hualda. They really provided time and effort for this thesis to make it
sound good. I would also like to thank Ms. Dee, Ms. Malou and Ms. Flo for their
encouraging words and discussions for us graduating students to believe in our
capabilities.
Special thanks are due to some people of CAO, TACDRUP, NSO, Barangay
Halls of Lagao and San Isidro and to all of the respondents of this study. Without
these people, this thesis would be as dull as an empty glass.
I would like to express my gratitude to Hannee and Bam-bam who guided and
accompanied me during the data collection period. To Abe, Marj, Kuya Resmar,
Kuya, Ate Rox and Tita Buds, who allowed me to borrow their desktops or laptops
and granted me no fees for printing in some points of the thesis writing process,
thanks a lot.
To my hardworking and cool ABE classmates, Ate Rox, Nades, Marj, Fritz,
Ya Resmar, Tina, Ate Jane, Ya Rodel, Ate Princess, Ate Cheng, Ate Tamin, Nor,
Mon, Llana, Yhang, Sheen, Ya Nikko, Jenny, and Tel, thank you for the fruitful years
we shared. To my HS barkada, Bes, Wena, Wed, Let, Han, Ray, Rang, Kuya, and to
my college friends, Meng, Ray, Van, Joice, Tita Ray, Chen, Niña, Jewel, and Myca,
thank you for the help, fun and encouragement you provided me. Super thank you
friends.
Exceptional thanks to my family specially mama, mommy, lolo, ate niña, tita
buds, my uncles and my siblings. I will ceaselessly be indebted to your love, care,
and help. Without their endless support, I would not be this inspired to work hard for
this study and for my entire college study. I really owe a lot!!!
Last but not definitely the least, to our Almighty Father, who provides
everything we need, thank you Lord.

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TABLE OF CONTENTS

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Thesis Manuscript Approval …………………………………………………. i
Title Page ……………………………………………………..……………… ii
Abstract ……………………………………………………..………………... iii
Acknowledgement ……………………………………………………..…….. iv
Table of Contents ……………………………………………………..……… v
List of Tables ……………………………………………………..………….. vii
List of Figures ……………………………………………………..…………. viii
List of Appendices ……………………………………………………..…….. ix

Chapter 1. INTRODUCTION
1.1 Background……………………………………………………..… 1
1.2 Statement of the Problem ………………………………………… 3
1.3 Objectives of the Study ……………………………………….….. 5
1.4 Significance of the Study ……………………………………….... 5
1.5 Scope and Limitations of the Study ……………………………… 6
1.6 Definition of Terms ………………………………………………. 7

Chapter 2. REVIEW OF THE RELATED LITERATURE AND STUDIES

2.1 Motives for Buying Organic Products ……………………….…... 8
2.2 Estimation of Willingness to Pay (WTP) ………………………… 9
2.3 Contingent Valuation ………………………………………..…… 10
2.4 Elicitation Techniques ……………………………………………. 11
2.5 Binary Logistic Regression ………………………………………. 12
2.6 Related Studies …………………………………………………… 13

Chapter 3. METHODOLOGY
3.1 Theoretical Framework …………………………………………... 18
3.2 Empirical Framework/Data Analysis …………………………….. 19
3.3 Data Collection …………………………………………………... 22

Chapter 4. RESULTS AND DISCUSSIONS

4.1 Socio-demographic Profile
4.1.1 Age …………………………………………………… 26
4.1.2 Gender …………………………………………….….. 26
4.1.3 Civil Status …………………………………………… 27
4.1.4 Educational Attainment and Years of Schooling …….. 27
4.1.5 Household Size ………………………………………. 28
4.1.6 Socio-economic Class ………………………………... 29
4.2 Awareness Levels
4.2.1 Awareness regarding Organic Rice ………………….. 30
4.2.2 Knowledge regarding Sustainable Agriculture ………. 31
4.2.3 Knowledge about Pesticide Residues ………………... 32
4.2.4 Knowledge regarding Water Pollution ………………. 32
4.3 Attitudinal Characteristics
4.3.1 Past experience of Purchasing Organic Rice ………… 33
4.3.2 Importance attached to Price …………………….…… 34
4.3.3 Willingness to Buy if Organic Rice is more available .. 34
4.3.4 Importance attached to Packaging …………………… 35
4.3.5 Importance attached to Certification …………………. 35
4.3.6 Respondents’ response about farmers must engage in 36

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 sustainable agricultural practices ……………………..
4.3.7 Respondent’s belief that chemicals have negative 36
effects in the environment …………………….………
4.3.8 Regular consumption of rice ………………………..... 37
4.3.9 Regular price of rice ………………………………….. 37
4.3.10 Willingness to Pay for Organic Rice …………………. 39
4.3.11 Reasons for buying Organic Rice ……………………. 41
4.3.12 Reasons for not buying Organic Rice ………………... 41
4.4 Willingness to Pay (WTP) Models
4.4.1 MIDDLE Income Class’ WTP Model ……………….. 43
4.4.2 HIGH Income Class’ WTP Model …………………… 44
4.4.3 OVERALL WTP Model ……………………………... 45
4.4.4 Models’ Performance ………………………………… 47

Chapter 5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary and Conclusions ……………………………………….. 49
5.2 Recommendations ………………………………………….…….. 51

References ……………………………………………………………………. 53
Appendices …………………………………………………………………… 57

LIST OF TABLES

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 Tables Title Page
4-1 Socio-economic classification of respondent households. 29
4-2 Distribution of knowledge levels of organic rice responses. 31
4-3 Distribution of knowledge levels of sustainable agriculture 32
responses.
4-4 Distribution of knowledge levels of pesticide residues 32
responses.
4-5 Distribution of knowledge levels of water pollution 33
responses.
4-6 Respondents’ past experience of purchasing organic rice 34
4-7 Distribution of respondents’ responses regarding price as an 34
important factor.
4-8 Distribution of respondents’ responses willingness to buy if 35
organic rice is more available.
4-9 Distribution of respondents’ responses regarding packaging 35
as an important factor.
4-10 Distribution of respondents’ responses about willingness to 36
buy if organic rice is not yet certified.
4-11 Distribution of respondents’ responses about farmers must 36
engage in sustainable agricultural practices.
4-12 Distribution of respondents’ belief that chemicals in 37
agriculture have negative effects in the environment.
4-13 Distribution of respondents according to rice consumption 37
per day.
4-14 Distribution of respondents according to the price of rice 39
regularly consumed.
4-15 Distribution of willingness to pay responses. 40
4-16 Reasons why consumers buy organic rice. 41
4-17 Reasons why consumers do not buy organic rice. 42
4-18 Logistic Regression Estimates for the MIDDLE Income 43
Class Willingness to Pay Model.
4-19 Logistic Regression Estimates for the HIGH Income Class’ 44
Willingness to Pay Model.
4-20 Logistic Regression Estimates for the OVERALL 46
Willingness to Pay Model.
4-21 Models’ Performance. 47

LIST OF FIGURES

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 Figures Title Page
3-1 Questionnaire Structure 24
4-1. Distribution of respondents according to age. 26
4-2 Distribution of respondents according to gender. 27
4-3 Distribution of respondents according to civil status. 27
4-4 Distribution of respondents according to educational attainment. 28
4-5 Distribution of respondents according to years of education. 28
4-6 Distribution of respondents according to household size. 29
4-7 Awareness regarding organic rice. 31
4-8 Distribution of respondents according to the price of rice 38
regularly consumed.
4-9 Distribution of respondents according to willingness to pay for 39
organic rice.

LIST OF APPENDICES

Appendix Title Page

1 Survey Questionnaire 57
2 Raw Data for Analysis 60

Chapter I
INTRODUCTION

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A. Background
All over the world, consumers have increasing concerns about their health as
well as the environment’s health. They are now worried about the presence of the
negative consequences of chemical residues on their health and on the environment in
conventional production methods. Because of this, markets for “green” and eco-
friendly products are rapidly increasing (Canavari and Olson, 2007).
One “green” and eco-friendly product is organic food. Organic food is a
product of organic agriculture or organic farming. Organic agriculture includes all
agricultural systems that dramatically reduce the use of chemo-synthetic fertilizers
and pesticides and instead allow local soil fertility and natural capacity of plants and
animals to increase both agricultural yields and disease resistance (IFOAM, 2003).
One of these organic products is organic rice. This is the major organic product of the
Philippines that are sold locally mainly because rice ranks as the most important
cereal in the Philippines. However, according to Alfon and Redoña (2005) of
Philippine Rice Research Institute Central Experiment, Philippine organic rice is yet
to be labeled as “organic” because the functional definition for the product is not
clear. This may be because the National Standard on Organic Rice Production and
Processing (NSORPP) is still under consultation; therefore, the production systems
and quality definitions for “organic rice” vary from one group to another. But now,
the Organic Certification Center of the Philippines (OCCP), an independent, private,
membership-based, organic-standard setting and organic certification body already
exist to certify farms that are fully adopting organic rice farming (PCARRD, 2006).
For Mr. Rafael Demafeliz (2008), Rice Program Coordinator of City Agriculturist’s
Office (CAO) of General Santos City, organic rice is a product of a production
method that has not used any pesticide nor has it used any synthetic or chemical
fertilizer in any of its growth phase. This will be the definition that will be used
throughout the paper.
The market for organic product is growing with an annual average growth rate
of 20-25%, not only in Europe and North America but also in many other countries,
including the Philippines (IFOAM, 2003). In the Philippines, organic agricultural
production was launched in 1986 and since then the area of production has been
increasing dramatically (Ara, 2003). Philippine organic agriculture is still in its
emergent or incipient phase (IFOAM, 2003; FIBL, 2006), and the production is
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steadily growing between 10-20% annually (FAS/USDA, 2000). The area devoted to
organic rice production is about 0.35% of the total land area allocated for rice in the
Philippines (Alfona and Redońa, 2005). According to PhilDHRRA (2004), as of
2001, Magsasaka At Siyentipiko Para Sa Pag-Unlad Ng Agrikultura (MASIPAG)
data shows that there are 1,897 farmers (with 1,754 hectares) who are fully adopting
organic rice farming, and 11,052 farmers (with 15,411 hectares) adopting the low-
chemical and pesticide practice (MASIPAG, 2001).
According to Roddy et al. (1994) as cited in Gil et al. (2001), the low demand
for organic rice in the Philippines can be explained by problems related to consumer
product acceptability, such as new product and deficiencies in distribution channels.
On the other hand, there were studies which found out that the low supply of organic
food such as organic rice resulted from high costs, especially labor costs, and the
difficulty of shifting from conventional to organic farming (Vetter and Christensen,
1996 and Hamiti et al., 1996 as cited in Gil et al., 2001).
In General Santos City, one of the cities in the Philippines, it was estimated
that almost 10% of the total area devoted for rice is already allocated for organic rice
production (Demafeliz, 2008). However, the CAO of General Santos City had not yet
done any studies regarding the demand for organic rice that may provide General
Santos farmers a guarantee that their organic rice will be patronized by the consumers.

General Santos City

General Santos City (GenSan) is situated in the southern part of the country, in
the province of South Cotabato. The city has a population of 535,747 as of 2007,
making it as one of the most populous cities in the Philippines. General Santos City
lies at the southern part of the Philippines. It is located at 6°7'N 125°10'E. GenSan is
strategically located within the trading and economic center of SOCSKSARGEN
Growth Area (South Cotabato, Sultan Kudarat, Sarangani and General Santos).
Fertile agricultural lands at 17,489 hectares are 32.63% of the city's total land area
(Official Website of General Santos City, 2008).
Some municipalities in Region XII are already into organic rice farming. The
municipalities of Norala, Surallah, and Sto. Nińo in the province of South Cotabato as
well as the municipalities of Isulan and Bagumbayan in the province of Sultan
Kudarat are the key places where Organic Rice farming is practiced. In an interview

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with Mr. Rafael C. Demafeliz and Ms. Merlinda M. Donasco of the CAO of General
Santos City, 10% of the rice farmers in General Santos City, having more or less 15
hectares, already practice organic rice farming. According to Eddie Panes, chairman
of the Association of Sustainable Agriculture Practitioners of Palimbang (ASAPP), a
big bulk of their organic rice are sold in General Santos City, which is the nearest key
urban center from the various towns and municipalities with a travel time of more
than three hours (The Organic Store, 2007). In General Santos City’s major malls,
KCC Mall of GenSan and Gaisano Mall, organic rice is already being sold.

B. Statement of the Problem

In the Philippines, organic rice farming is a growing sector which is
encouraged by the government and many private initiatives. The General Santos City
Agriculturist Office advocates the practice of organic farming. There are several
programs and activities that supplement its advocacy. With this, the production of
organic farming is expected to increase but is there also a market for organic rice? Are
the consumers of General Santos willing to pay a price premium for organic rice?
The increase in the number of organic or “safer” foods indicates that there is a
potential market. But then, consumers know very little about the production process.
This might be true for the urban areas in the Philippines and in General Santos City as
well and therefore lead to a low level of confidence in organic production. This
implies that there is not enough information on the consumers’ side regarding organic
agriculture or production. Thus, this study is relevant to explore consumers’ level of
awareness regarding organic rice farming.
Another issue or problem related to this study is that it is difficult to encourage
rice farmers to adopt organic farming method because of the fact that conventional
farming is easier done with the easily available commercial fertilizers and pesticides.
According to Ms. Juliet Marazil G. Ballo (2008) of Technical Assistance Center for
the Development of Rural and Urban Poor (TACDRUP), almost 8 out of 10 rice
farmers do not religiously follow the trainings TACDRUP gave them. Other factors
such as lack of government support, lack of consumer awareness on benefits of
organic rice, lack of market information, high certification costs and high costs of
inputs prevent rice farmers to apply organic rice farming (Rodriguez et al., 2007).
Price premium exists for organic rice because of the low supply of organic rice
from few rice farmers. Rice farmers do not engage in organic rice farming due to high
11
costs, especially labor costs, and the difficulty of shifting from conventional to
organic farming (Vetter and Christensen, 1996 and Hamiti et al., 1996 as cited in Gil
et al., 2001). Shifting from conventional to organic farming entails high costs of
production at the initial stages. However, in the long run, costs of production in
organic farming will already involve lower costs of production. According to Ms.
Ballo (2008) of TACDRUP, the potential lower costs of production will provide the
farmers better income. With this, price premium exist in order for the farmers to be
highly encouraged to practice organic farming. And also, price premium exists
because of the “safe” feature added to organic rice.
With this, according to Ms. Ballo (2008), there is a need for a price premium
in organic rice being sold in the market in order for the rice farmers to be assured that
they can gain profit out of producing organic rice, thus, serves as an incentive to them.
As of the middle of 2008, there was no existing study that determined the
consumers’ willingness to pay for organic rice in General Santos City. Thus, this
study aimed to address the following questions:
1. What is the level of consumer awareness regarding organic rice?
2. What are consumers’ reasons for buying or not buying organic rice?
3. How much additional percentage of the price of conventional rice will the
consumers be willing to pay for organic rice?
4. What are the factors that influence the willingness to pay (WTP) for
organic rice for various levels and for all respondents in general?
5. What are the similarities and differences of factors that affect WTP for
organic rice among income classes?

C. Objectives of the study

The main objective of this study is to derive willingness to pay estimates for
organic rice in General Santos City. Specifically, the study aims to accomplish the
following goals:
1. To identify the level of consumer awareness regarding organic rice,
2. To determine consumers’ reasons for buying and not buying organic rice,
3. To determine the level of price premium that General Santos City
consumers are willing to pay for organic rice,
4. To analyze the factors that can influence the WTP for organic rice for
various income levels and for all respondents, and
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 5. To assess and compare the factors that can affect the WTP for organic rice
among income classes.

D. Significance of the Study

People from both developed and developing countries prefer organic over
conventional rice, owing to the innumerable health benefits of organic rice. Organic
rice has a far greater quality, as compared to conventional one (Anuradha, 2001).
Thus, this study attempted to assess what consumers prioritize in terms of purchasing
rice – conventional rice or organic rice with higher price.
The focus of most studies on agricultural products has been in the production
side of these commodities, including the technology and processes involved. This
kind of production philosophy in agricultural products has revealed many possible
improvements to the agribusiness cycle but has given inadequate attention to the
demand side (Concepcion, 2005). This study focused on consumers’ willingness to
pay for organic rice in General Santos City, the demand side of the agribusiness of
organic rice. The results of this study can contribute for the possible success of the
rice industry, particularly organic rice.
The number of studies regarding consumer surveys on organic products in
developing countries is very limited, unlike in developed countries. Thus, this study
serves as a pilot study on the willingness to pay for organic rice of consumers in
General Santos City.
Among the valuation or willingness to pay studies done by UP Mindanao
students, this research is the first to use binary logistic regression as a tool for
analysis; future researchers may evaluate the strengths and weaknesses of this
instrument. This study also contributes to the valuation or willingness to pay
literature.
Consumer awareness for organic rice was improved during the data collection
period of the study by sharing to the respondents the benefits of organic rice and
organic rice farming after the interview. With this, consumers may better evaluate
their buying behavior for rice. In addition, the findings of this study can serve as
inputs for the local government of General Santos City and the provincial government
of South Cotabato on formulating policies and programs for the welfare of both
organic rice farmers and consumers alike.

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E. Scope and Limitations
This study dealt with the consumers’ willingness to pay for organic rice in
General Santos City. It focused on determining the price premium consumers were
willing to pay for organic rice and the analysis of factors influencing the willingness
to pay of consumers for organic rice. The factors that were used for the analysis were
limited to demographic factors, attitudinal factors and the level of awareness
regarding the concept of organic rice, sustainable agriculture, pesticide residues and
water pollution.
General Santos City was the general area since it is the nearest key urban
center from the various towns and municipalities of South Cotabato that produce
organic rice. Specifically, Brgy. Lagao (1st and 3rd) and Brgy. San Isidro (Lagao 2nd)
were the areas for the study since the total population of these barangays comprises
16.42 % of General Santos City in 2007 (NSCB, 2008). These areas also likely
covered all income classes. The barangays’ land use classifications are residential,
socialized housing, commercial, institutional parks, and recreation (City Planning,
2007). Moreover, the population of these barangays has access to the supermarkets
where organic rice is mostly marketed. As much as the researcher wanted to cover
larger area, time and budget constraints were hindrances to include a larger sample
size.

F. Definition of Terms
1. Barangay – the basic political unit in the Philippines. It is the smallest
administrative division in the Philippines (Barangaynetwork, 2008).
2. Contingent Valuation Method (CVM) – refers as a “stated preference”
method, because it asks people to directly state their values (USDA –
NRCSNOAA, 2000).
3. Conventional rice – a product of a farming system that uses any amount of
synthetic fertilizers, pesticides, and growth regulators (IFOAM, 2003).
4. Organic Farming – refers to a farming system which uses organic manure,
and avoids or largely excludes the use of synthetic fertilizers, pesticides and
chemicals (FAO, 1998 as cited in Gil et al., 2001).
5. Organic rice – a product of production method that has not used any
pesticide nor has it used any synthetic or chemical fertilizer in any of its
growth phase (Demafeliz, 2008).
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6. Price Premium – the additional percentage charged for organic products
such as organic rice when compared with conventional products’ prices
(Rodriquez et al., 2001).
7. Willingness to Pay (WTP) – the sum of money representing the difference
between consumers´ surplus before and after adding or improving a food
product attribute (Gil et al., 2001).
8. Conventional Farming – a farming system that uses any amount of
synthetic fertilizers, pesticides, and growth regulators (IFOAM, 2003).

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 Chapter II
REVIEW OF LITERATURE

A. Motives for Buying Organic Products

Consumers have become distanced from the origin of their food and the
context of food production which is less transparent today. This influences how
consumers perceive their food and can be seen as part of the great demand for locally
and organically produced foods. Organic consumers are regarded to distinguish their
roles in the food system. Buying organic can be seen as a way of dealing with the
complex, modern food system and its perceived risks because certified organic
products are controlled and bear information about their production (Torjusen et al.,
2001 as cited in Schobesberger, 2006). But for Pedersen (2003) the perception of the
choice of organic products as a risk-reducing strategy explains only a part of the
decision process and the demand for organic food. He calls for a broader view on this
subject and names the search for trustworthy exchange partners, the wish to support
local producers or to make a political statement as some of further factors included in
the purchase decision.
There is no single motive for buying organic, often there are several reasons
working together. Worry about one's health and quality aspects are often mentioned
as reasons for starting to consume organic products. Consumers frequently
purchasing organic products show concerns for many parts of the food system which
are related to health in a wide context (Torjusen et al., 2001 as cited in Schobesberger,
2006). These include how the food was produced, processed and handled and how
these steps affected people, animals and nature. When people intensify their
consumption of organic, altruistic motives like supporting organic farming or
protecting the environment become more important.
According to a study by Sanders and Richter (2003), income level and the
presence of children influence the motives and the buying decision. Consumers with
high income have a wide range of motives for purchasing organic food and their
reasons are more hedonistic and altruistic. For medium and lower income classes
animal welfare and health are the main concerns. Households with children also have
a wider range of motives, where environment and animal welfare are the main
reasons. In contrary to other studies, responsibility for the family and the health of
16
children are only minor arguments for buying organic in Switzerland (Sanders and
Richter, 2003).
In the United States, consumers mentioned health and nutrition before taste
and the environment as reasons why they purchased organic food (Hartman Group,
2000 cited in Dimitri and Greene, 2002). Consumers value organic products as
healthy, environmentally friendly, more tasty, and nutritious than conventional ones
(Saba and Messina, 2003).

B. Estimation of Willingness to Pay (WTP)

According to Gil and Sanchez (2001), consumers seek food safety and are
willing to pay higher prices for “healthy products” since they obtain greater utility
level and at the same time reducing health risks. However, these consumers are
unable to determine food safety before purchase, although this is considered as the
most important constraint to economic efficiency in the production and marketing of
food safety. A method commonly applied to determine food safety benefits is
estimating consumers´ willingness to pay for safer and better quality food. (Goldberg
& Rosen, 2005). Along these lines, the notion of willingness to pay could be defined
as the sum of money representing the difference between consumers´ surplus before
and after adding or improving a food product attribute. Van Ravenswaay & Wohl
(1995) and Halbrendt et al. (1995) as cited in Gil and Sanchez (2001) introduced
models that estimate consumers’ willingness to pay when adding or enhancing a given
quality attribute. Such models lie on Lancaster approach (1966), which sustains that
consumers directly derive utility from goods´ attributes.
When measuring willingness to pay (WTP), some methodologies apply
primary data directly derived from consumers. These methods are contingent
valuation, conjoint analysis and experimental auctions. Hedonic prices is the most
well-known method, which used indirect sources to infer consumers´ willingness to
pay. While the methodologies in the first group lie on consumers´ elicited preferences,
hedonic prices is based on consumers´ revealed preferences (Lee & Hatcher, 2001 as
cited in Gil and Sanchez 2001).

17
C. Contingent Valuation (CV)
The origins of contingent valuation (CV) are the estimation of non-market
goods1, but it is now widely used to evaluate willingness to pay for new products such
as organic products. The contingent valuation method (CVM) involves directly asking
people, in a survey, how much they would be willing to pay for a specific good or
service. It is called “contingent” valuation because people are asked to state their
willingness to pay, contingent on a specific hypothetical scenario and description of
the service or good (USDA – NRCSNOAA, 2000). The contingent valuation method
is referred to as a “stated preference” method because it asks people to directly state
their values rather than inferring values from actual choices, as the “revealed
preference” methods do. The fact that CV is based on what people say they would do,
as opposed to what people are observed to do, is the source of its greatest strengths
and its greatest weaknesses.
The CVM creates a hypothetical market situation for a given good or service.
It tends to quantify the value consumers confer to products by associating that value
with the sum of money they are willing to pay (Kawagoe & Fukunaga, 2001 as cited
in Gil and Sanchez, 2001). Studies conducted through CVM offer a specific survey
design, especially when they inquire about WTP. They solicit information about
consumption behavior, risks perceptions and experiences, and socio-demographic
information (Mitchell & Carson, 1989; Carson, 1999). Respondents face a
hypothetical purchasing situation in which they have to answer how much money they
are willing to pay for a given product, or if they are willing to pay a certain premium,
expressed either as a sum of money or as a percentage above the reference price
(Carmona-Torres & Calatrava-Requena, 2006).
Although the CV approach is more commonly used to measure consumer
preferences for non-market (e.g., environmental) goods, its application in WTP
studies for organic foods is useful and appropriate for three reasons. First, CVM has
emerged as a useful research method to study factors that influence food demand
(e.g., van Ravenswaay 1995; Lee and Hatcher 2001; Loureiro, McCluskey, and
Mittelhammer, 2002). They also provide rich conceptual frameworks for integrating
product attributes into economic and marketing analyses. Second, the CV method can
potentially capture the true value that consumers place on reducing disease risks

1
Economic goods from all kinds of ecosystem and environmental services (USDA – NRCSNOAA,
2000).

18
associated with consuming certain types of foods. Finally, CV can be employed as an
alternative to concept testing to forecast the market potential for new product concepts
(Mitchell and Carson, 1989).

D. Elicitation Techniques
According to Portney (1994), elicitation techniques are applied using CVM to
draw out the value of a good or service. The elicitation techniques used in any CV
studies are of different types. Elicitation techniques are essential components of any
studies using CVM. The different elicitation techniques are discussed below.

1. Bidding Game Approach

In this approach, respondents will be randomly assigned a particular bid from
a range of predetermined bids. The bid that will be assigned may either be a lower or
higher level bid. The respondents would then be asked to answer ‘yes’ or ‘no’ to that
particular bid, and the procedure would continue until ‘the highest positive response is
recorded (Randall et al, 1974 as cited in Venkatachalam, 2004). This approach offers
relatively better results since it gives a ‘market-like’ situation to the respondents in
which they could research their preferences. Another advantage of this approach is
that the researcher could obtain maximum willingness to pay value.

2. Payment Card Approach

Through this approach, the respondents will choose their maximum WTP
value out of the range of WTP values for the good in question. The researcher or
interviewer will provide the respondents with another benchmark version of the
payment card that contains consumers’ average WTP amount for other goods. Using
this approach, there would be a chance that the WTP values will be possibly affected
by ranges of biases (Mitchell and Carson, 1984).

3. Open-ended Elicitation Method

This technique involves asking the respondents for their maximum WTP
amount for a public good or policy with no value being suggested to them. Using this
approach does not require an interviewer and does not result in any starting point bias
(Walsh et al., 1984 as cited in Venkatachalam, 2004). Thus, this approach is
convenient to answer. This approach may create large number of non responses since
19
respondents either find it difficult to answer or do not have incentive to provide true
answer. Moreover, the open-ended questions may draw strategic bias and
respondents may answer the cost rather than true value.

4. Dichotomous Choice Method

This format provides respondents with only two choices (i.e., "Yes" or "No" to
a posted price) to respondents. This approach resembles actual market choice
behavior. Indeed, this property motivated the National Oceanic Atmospheric
Administration (NOAA) panel to strongly recommend the DC format when they
convened in 1993 to evaluate the pros and cons of various CV survey question
formats (NOAA 1993). However, lesser information can be gained in this type of
technique compared to others (Moon et al., 2003).

E. Binary Logistic Regression

Modeling the relationship between explanatory (independent) and response
(dependent) variables is a fundamental activity encountered in statistics. To examine
the relationship between a single explanatory variable and a single response variable,
simple linear regression is commonly used. On the other hand, when there are several
explanatory variables, multiple regression is used (Cook et.al., 2000). However, not
all dependent variables are numerical values. Instead, the response is simply a
designation of one of two possible outcomes (a dichotomous or binary response)
(UNT, 2009).
Binary Logistic regression had been popular to address dependent variable that
is binary in nature like success or failure or a yes or no response (Wuensch, 2008). It
can be used to predict a dependent variable on the basis of continuous and/or
categorical independents and to determine the percent of variance in the dependent
variable explained by the independents; to rank the relative importance of
independents; to assess interaction effects; and to understand the impact of covariate
control variables. The impact of predictor variables is usually explained in terms of
odds ratios (Garson, 2008).
Logistic regression applies maximum likelihood estimation after transforming
the dependent into a logit variable (the natural log of the odds of the dependent
occurring or not). In this way, logistic regression estimates the odds of a certain event

20
occurring. Note that logistic regression calculates changes in the log odds of the
dependent, not changes in the dependent itself as OLS regression does (USF, 2009).
When OLS regression is used for a dichotomous dependent, the assumptions
of normality and homoscedasticity as a normal distribution is impossible with only
two values are violated. For a dependent variable which assumes values of zero (0)
and one (1), the commonly used regression model will still allow estimates below
zero (0) and above one (1). The multiple linear regression does not handle non-linear
relationships, whereas log-linear methods do. These objections to the use of
regression with dichotomous dependents apply to polytomous dependents also which
is the multiple logistic regression (Garson, 2008).

F. Related studies on WTP

Several studies have examined consumer willingness to pay a premium for
organic products and have investigated underlying consumers’ motivations for
purchasing organic foods. Many of these studies utilized CVM to examine the level of
price premium consumers are willing to pay for organic products and the socio-
economic and demographic factors that affect consumers’ willingness to pay. But
there are also studies that have not employed CVM in estimating consumers’
willingness to pay for a price premium for organic products.
The willingness to pay of different consumer segments in Spain for organic
products was estimated by Gil, Garcia, and Sanchez (2001). Specifically, the organic
products that were considered in their study were vegetables, potatoes, cereals, fruits,
eggs, chicken, and red meat. Since the organic market in Spain was still too “thin”
and organic products were not available in all retail outlets, the CVM was chosen for
the study’s methodology. The data used in the study came from a survey conducted
in July through August 1997 in the Spanish regions of Navarra and Madrid. Four
hundred respondents, who were main purchasers of food products within each of their
households, were randomly selected from a census data and were personally
interviewed at home in each region. Results revealed that only organic food
consumers showed willingness to pay a premium. Among the wide range of products
considered, consumers were willing to pay a higher premium for meat, fruits, and
vegetables; it can be implied that more importance is given by consumers in fresh and
perishable products. The results also showed that regional differences were identified
when it was observed that consumers were willing to pay a higher premium for
21
organic products in the organic producing region of Navarra than in the consuming
region of Madrid. Several recommendations were given by the authors, which
includes increasing the consumers’ knowledge of an organic product, creating
marketing strategies targeted towards increasing consumption of the organic foods
with high WTP premiums, and reducing marketing margins of the organic supply
chain to reduce prices at the retail level.
Boccaletti and Nardella (2001) presented the results and analysis of a survey
of Italian consumers’ WTP for pesticide-free fresh fruit and vegetables. The said
survey was composed of 336 in-person interviews conducted in January 1998 in three
large supermarkets located in Northern Italy. Among the main explanatory variables
used in the empirical model, income and individual perception of pesticide risk
concern were found to give the most relevant increase in the probability of a positive
premium. The results of the study suggested that Italian consumers were generally
concerned about health risks from pesticides, with only 11% of the respondents not
willing to pay a premium for pesticide-free fresh fruits and vegetables. But 70% of
the respondents who were willing to pay a premium would only pay a small premium
(6 to 10%) above regular retail prices. For the implications, the proponents said that
the price premium on the pesticide-free products sold by producers through mass
marketing channels should not exceed 10% and that fresh fruits and vegetables should
have an easily recognized certification procedure so that consumers would be able to
separate regular produce from organic ones.
A study conducted by Cranfield and Magnusson (2003) determined if
Canadian consumers would pay a premium for Pesticide-Free Production (PFP) food
products. PFP is similar to the organic production system because it emphasizes on
reduced pesticide use in conjunction with increased reliance on producer knowledge
of agronomic practices that mitigate weed, insect, and disease pressure. The CVM
was used in the survey because it addresses the issue of the inability to observe
consumers’ actual decisions to purchase and pay a premium for products that are not
available in the market place like the PFP ones. The results showed that 67% of the
respondents would be willing to pay a modest (i.e., 1 to 10%) premium, while about
5% of the respondents would be willing to pay more than a 20% premium. With
regards to the factors influencing the WTP, the results indicated that consumers are
more likely to pay a higher premium if they are younger, are more likely to shop at
health food stores to purchase a PFP food product, and are concerned with pesticides
22
in agriculture and food. The study recommended that PFP producers should market
their products and their production system to processors who supply health food
stores.
Akgungor, Miran, and Abay (2007) estimated a representative sample of
Turkish urban consumers’ willingness to pay for reduced chemical residues in food
and the trade-off they make between cosmetic quality and food safety. The study
revealed that educated and high-income individuals have increased interest on organic
product purchases. According to the results, the reason for choosing organic products
was that consumers perceived that organic products have higher nutritional value and
carry low health risk. The implication of the results was a potential demand for
organic products in Turkey’s urban markets, since consumers were willing to pay a
price premium of 36%.
Rodriguez, Lacaze, and Lupin (2007) estimated the consumers’ willingness to
pay for organic food products available in the Argentinean domestic market. The
proponents selected the CVM to estimate the WTP. The selected products for the
study were regular milk, leafy vegetables, whole-wheat flour, fresh chicken, and
aromatic herbs. The results of the study indicated that organic products are positively
valued in Argentina, since consumers affirm to be willing to pay price premiums to
acquire these products. According to the results, higher income level respondents
were willing to pay higher prices for organic products: 12.2% more for regular milk,
87% more for leafy vegetables, 7.5% more for whole-wheat flour, 20% more for fresh
chicken, and 110% for aromatic herbs. The study provided useful evidence to the
government to gain support in the promotion of organic production, regulation
processes, and labeling programs out of the results of the study.
Torres (2003) studied the WTP for the preservation of Mt. Apo Natural Park
which employed CVM, which is primarily used for monetary valuation of consumer
preferences for non-market goods. The study determined whether people would place
certain value on the existence of an environmental resource, specifically the existence
of the Mt. Apo National Park. The data used for estimating the WTP was collected
from 600 residents of Davao City, Digos City, and Tagum City. The result of the
study showed that the average willingness to pay value derived from the estimation
was higher than the presently imposed entrance fee to Mt. Apo. The factors that were
found to influence the WTP were age, civil status, and occupation of the consumers.

23
 There are several studies which examined the WTP for organic products that
did not utilize CVM as a component of their methodologies. These studies can still be
of help in molding the methodology part of this study.
Rundgren (2000) concluded that the perception of health risks influence the
willingness to pay for food. Low prices are less important for organic buyers than for
people who do not buy organic food (Wier and Andersen, 2003). Torjusen et al.
(2001), as cited in Schobesberger (2006), found similar results in Norway. Their
survey shows that organic consumers are less concerned about low prices,
convenience and wider selections of products. A survey with a small sample size in
Mumbai, India showed that about 25% of the consumers were aware of the existence
of organic products, 9% also bought organic products mainly for health reasons. A
lack of knowledge and awareness was the main reason for not buying organic
(Garibay and Jyoti, 2003). Another study from India shows that around 71% of
consumers perceived organic vegetables as tastier and healthier, but only 54% of them
knew what organic production of vegetables meant (Rundgren, 2000). A consumer
survey among households in Turkey (Akgüngör, 1999 cited in Rundgren, 2000)
showed that about 9% of the households have heard about organic food. Depending
on the kind of product, between 1% and 10% of those surveyed prefer organic
products. For 75% of the interviewed persons nutritional value and absence of
residues were important when buying food (Akgüngör, 1999 cited Rundgren, 2000).
A study was conducted to determine market potentials and WTP for selected
organic vegetables in Kandy, Sri Lanka. It is specifically done to identify the market
potentials for organic products and consumer expectations in the area (Piyasiri and
Ariyawardana, 2002). It also identified the factors that influence the additional
willingness to pay for organic vegetables. Results revealed that most of the
consumers are aware of organic products and this awareness had influenced their
consumption of organic products in the past. The majority of the consumers
considered price as an important factor for their organic product consumption and had
attached a higher importance for certification from a reputed organization.
Respondents also indicated that organic products should be available in accessible
shops for the convenience of purchasing. Results of the regression analysis revealed
that of the socio-demographic factors, income, environmental education and years of
education significantly influenced the WTP for organic vegetables. Based on the
study it could be concluded that consumer awareness effectively advances the demand
24
for organic products and there is a great potential to introduce organic products to the
supermarkets in Kandy, Sri Lanka. The authors recommended to introduce organic
products, widely in supermarkets, to have proper awareness programs among
consumers in promoting the demand for organic products.
The study conducted by Ara (2002) employed a choice experiment in order to
elicit consumers’ preferences for various attributes of organic rice. The author’s
respondents are from Manila and Naga. Half of the respondents in Manila were aware
of organic rice products, while in Naga it was only 33%. The author did not expect
these results because separate studies by Xavier University (1995) found no one
among the 378 respondents being aware of organic rice in the market and the Upland
Marketing Foundation (1998) found only 4% in Manila being aware of organic rice
product.
In both cities, health risk is a primary concern of the consumers. Other factors
(environmental, eating quality, certification of products and trade factor) attributed by
the study showed varying priorities between the two cities. Consumers in Manila,
living far from the production site, are more concerned with certification – a
guarantee that such commodity is indeed organic. Those living near the production
site (Naga), consumers put more weight on farm environment. In both cities,
consumers’ utility increases when percentage of health risk decreases. The eating
quality of rice has significant attribute among high income groups in Manila. In
Manila, respondents showed WTP premium up to 13.6 pesos for 80% reduction of
health risk; thus giving high value to certification system. The higher income groups
were willing to pay higher premium value (Ara, 2002). Further investigation was
recommended by the author to determine what makes people prefer one certification
to another in each city and for each income category.
The preceding review presents meaningful information on the willingness of
consumers to pay a price premium for organic foods and environmental resources.
Since similar studies on organic rice in the Philippines and General Santos City have
not been done yet, the findings of this study provided additional information on the
subject. Thus, this study about WTP for organic rice is timely and relevant.

25
 Chapter III
METHODOLOGY

In this study, consumers’ willingness to pay for organic rice in General Santos
City, the methodology is divided in three parts: theoretical framework, empirical
framework/data analysis, and the data collection.

A. Theoretical Framework
The law of demand is utilized the theoretical framework that helped in
drawing the model for analysis in the study.

The Law of Demand

The law of demand states that the quantity of a well-defined good or service
that people are willing and able to purchase during a particular period of time
decreases as the price of that good or service rises and increases as the price falls,
everything held constant. Among the determinants of demand are tastes, number of
buyers, prices of related goods, income, and expectations (McConnell and Brue,
1999). If any of these determinants changes, the demand of that particular product
also changes. The relationship between income and the quantity demanded of a
product can be positive or negative one, depending on the nature of the product. If the
product is a normal good, the quantity demanded of the product increases as the
consumers’ income increases. This implies that the quantity demanded of a normal
good has a positive relationship with income. But if the product is an inferior good,
the quantity demanded of the product decreases as the consumer’s income increases,
hence implying that it has a negative relationship with income. On the other hand, the
price of related goods is also a critical factor that affects the demand of a certain good.
The relationship between the price of related goods and the quantity demanded of a
good can also be positive or negative. The positive relationship would occur in
substitutes, wherein the quantity demanded of the product in concern increases as the
price of the substitute good increases. The negative relationship would occur in
complements, wherein the quantity demanded of the product in concern decreases as
the price of the complementary good increases because both products tend to be used
together (Pindyck, 2001).

26
 In this study, various factors that may possibly affect the willingness to pay for
organic rice were predetermined. The factors that were considered were the
attitudinal factors (i.e. towards price, packaging), awareness factors (towards organic
rice, sustainable agriculture, pesticide residues, and water pollution), and
demographic factors (age in years, gender, household income, number of years of
education, and household size). Hence, the theoretical demand model that was used
in the study was in the form,

WTP = ƒ (attitudinal factors, awareness levels, demographic factors)

This theoretical model presents the basic economic concept of WTP being a
function of various factors.

B. Empirical Framework/Data Analysis

The CV approach was chosen for this study in view of the fact that CV is more
commonly used to measure consumer preferences for non-market (e.g.,
environmental) goods. CV is still applicable since organic rice is not usually available
in the markets of General Santos City. This study utilized the dichotomous method
wherein the researcher asked the respondents whether they were willing to pay a price
premium for organic rice or not. It could be assumed that the respondents’ answers
were based on the organic and conventional prices they find when choosing organic
rice over the conventional rice.
The dichotomous method used in asking respondents’ willingness to pay for
organic rice only obtained two answers (yes or no) and served as the dependent
variable. The explanatory variables were combination of categorical and continuous
variables. Binary logistic regression using the stepwise method was utilized to obtain
the factors that affect the willingness to pay for organic rice in terms of attitudinal
variables, awareness levels, and demographic features. The Binary Logistic
Regression Model was in the form:

WTP = β0 + Β1Pu + β2Av + β3Ce + β4Ag + β5Ch - Β6 Pr + Β7Pa + β8Or + β9Sa +

β10Kpr + β11W + β12A + β13G - β14S + β15E + β16 I

27
Where:

VARIABLE MEASUREMENT
DEPENDENT VARIABLE
WTP If the respondent is willing to pay a price 1 = yes, 0 = no
premium for organic rice
EXPLANATORY VARIABLES
Attitudinal variables
Pu If respondent or members of the household 1 = yes, 0 = no
purchased organic rice
Av If respondent would be willing to buy organic 1 = yes, 0 = no
rice if they were more available
Ce If the respondent would be willing to buy 1 = yes, 0 = no
organic rice even if it is not yet certified
Ag If the respondent agrees that farmers should 1 = yes, 0 = no
engage in sustainable agricultural production
practices
Ch If the respondent believes that the use of 1 = yes, 0 = no
synthetic chemical in agriculture has negative
effect on the environment
Pr If the respondent considers price as an 1 = yes, 0 = no
important factor in purchasing rice
Pa If the respondent considers packaging as an 1 = yes, 0 = no
important factor in purchasing rice
Awareness variables
Or Respondent’s knowledge about organic rice 0 = never heard
1 = know word
2 = know well
Sa Respondent’s knowledge about sustainable 0 = never heard
agriculture 1 = know word
2 = know well
Kpr Respondent’s knowledge about pesticide 0 = never heard
residues 1 = know word
2 = know well
W Respondent’s knowledge about water 0 = never heard
pollution 1 = know word
2 = know well
Demographic variables
A Age Continuous variable
(in years)
G Gender 1 = female
0 = male
S Household size Continuous variable
E Years of schooling Continuous variable
I Monthly household income Continuous variable

28
 The binary logistic regression model was estimated by maximum likelihood.
In order to compare what explanatory variables each income class give importance
and in order to determine the impact of these significant explanatory variables on the
willingness to pay dependent variable, a binary logistic regression model for each
income class was derived.
The following sub-sections discuss the tests and parameters that were
evaluated in the binary logistic regression models:

1. Significance tests for binary logistic regression

a. Hosmer and Lemeshow chi-square test of goodness of fit
This is the recommended test for overall fit of a logistic regression
model and is also called the chi-square test. It is considered more robust
than the traditional chi-square test, particularly if continuous covariates are
in the model or sample size is small (Garson, 2009). A non-significant chi-
square indicates that the data fit the model well (Wuensch, 2008).
b. -2LL statistic likelihood ratio
This is also called goodness of fit, deviance chi-square, scaled
deviance, deviation chi-square, DM, or L-square. It reflects the significance
of the unexplained variance in the dependent variable. This statistic is
found in the "-2 Log Likelihood" column of the model summary table of
the output (Garson, 2009). This statistic measures how poorly the model
predicts the decisions - the smaller the statistic the better the model
(Wuench, 2008). The likelihood ratio is not used directly in significance
testing, but it is the basis for the likelihood ratio test, which is the test of
the difference between two likelihood ratios (two -2LL's) (Garson, 2009).

2. Measures of Effect Size

a. Nagelkerke's R2
This is a modification of the Cox and Snell coefficient to assure
that it can vary from 0 to 1. That is, Nagelkerke's R2 divides Cox and
Snell's R2 by its maximum in order to achieve a measure that ranges from
0 to 1 (Garson, 2009). This can reach a maximum of 1 (Wuench, 2008).
3. Parameter Estimates Interpretation
a. Odds ratio
29
 The impact of predictor variables is usually explained in terms of
odds ratios. It represents the factor by which the odds (event) change for a
one-unit change in the independent variable (Garson, 2009).
b. Parameter estimates
These are the b coefficients used to predict the log odds (logit) of
the dependent variable. Parameter estimates (b coefficients) associated
with explanatory variables are estimators of the change in the logit caused
by a unit change in the independent variables (Wuench, 2008). Also, these
are simply parameter estimates which correspond to b coefficients in OLS
regression (Garson, 2009).

C. Data Collection
The areas of the study were the Brgy. Lagao (1st and 3rd) and Brgy. San Isidro
(Lagao 2nd). The interviews were conducted from 20 October to 22 November 2008.
Quota sampling method through known groups was utilized in this study. The
three income classes (high, middle, low) were the known groups. Forty respondents
were interviewed for each income class. The number of respondents for all income
classes was the same. With this, the study had a total of 120 respondents, which was
more than the minimum number of samples (100) needed for a representative sample
in descriptive studies (Sample and Sampling Technique, 2005).
Purposive sampling method was used since all households of different income
classes were widely scattered in the area. Moreover, this study targeted equal number
of respondents for each income class. Thus, random sampling techniques were not
applied.
Pretesting of the questionnaire was done on 22-23 August 2008 in Brgy.
Dadiangas East. This was conducted in order to determine type of primary data that
will be used for the study and if the potential respondents would likely understand
each question. Five questionnaires were given to the respondents, who were allowed
to answer the questionnaire on their own and five respondents were personally
interviewed. It was found out that potential respondents would likely understand each
question well and that personal interview was more effective than the other one.
Thus, primary data using personal interview was utilized. According to the US
Department of Agriculture Natural Resource Conservation Service and National
Oceanographic and Atmospheric Administration (USDA-NCRCSNOAA, 2000),
30
personal interviews are generally the most effective for complex questions, because it
is often easier to explain the required background information to respondents in
person, and people are more likely to complete a long survey when they are
interviewed in person.
Figure 1 shows the general sequence of the interview. The respondents were
first asked about their knowledge on organic rice, sustainable agriculture, pesticide
residues and water pollution. The respondents daily household consumption of rice
and the usual price of the conventional rice bought were asked.

Figure 1. Questionnaire Structure

The researcher asked the respondents if they experienced buying organic rice.
If the respondents already purchased organic rice before, they were asked for their
reasons for buying organic rice. On the other hand, if the respondent had not yet
purchased organic rice, he/she was asked about the reasons for not buying organic
rice.
Using the dichotomous method, the respondents were asked if they were
willing to pay additional amount for organic rice. If the respondent was not willing to
31
pay, the researcher asked the next questions. If the respondents were willing to pay
additional amount for organic rice, using the payment card method, the interviewer
asked the respondent to choose from the different ranges of percentage.
After asking the respondents’ willingness to pay for organic rice, they were
asked for some attitudinal factors. The respondent were asked if they believe or agree
that farmers should engage in sustainable agricultural production practices and if they
believed that the use of synthetic chemicals in agriculture has negative effects on the
environment. They were also asked if price, packaging, and certification were
important factors in purchasing rice and if they were willing to buy organic rice if
these were more available. Other factors that consumers consider in purchasing and
not purchasing organic rice that were not mentioned in the questionnaire were also
noted. The interview was concluded after asking the respondents demographic
features.

32
 Chapter IV
RESULTS AND DISCUSSION

This section is divided in four parts: socio-demographic profile of

respondents, awareness levels, attitudinal characteristics and the willingness to pay
models.

A Socio-demographic profile of respondents

1. Age
Figure 2 shows the distribution of respondents according to age. Seventeen of
the household respondents (14.17%) were 60 years old and above. On the other hand,
12 respondents (14.17%) were 55 to 59 years old. Twenty respondents (16.67%)
were aged 50 to 54 years old while 11 household respondents (9.17%) were between
45 to 49 years old. Fourteen respondents (11.67%) were 35 to 39 years old and 40 to
44 years old. Eleven respondents (9.17%) were between 30 to 34 years old and 15
respondents (15%) were 25-29 years old. Only 2.5% of the respondents were 18 to 24
years old.

Figure 2. Distribution of respondents according to age.

25 20
Frequency

18 17
20 14 14
15 11 11 12
10
3
5
0
e
ov
4

& 9
-2

-2

-3
-3

-4

-4

-5

60 -5
ab
18

25

30

35

40

45

50

55

Age range

33
2. Gender
As shown in Figure 3 below, majority of the respondents (60%) were female.
This is because the study intended to target the household member who made the
purchasing decision.

Figure 3. Distribution of respondents according to gender.

40%

60%

male
female

3. Civil Status
Figure 4 shows the distribution of respondents according to civil status. Most
of the respondents (83%) were married. This can be attributed to the household sizes
of the respondents. Sixteen respondents (13%) were single and only 5 respondents
(4%) were widower.

Figure 4. Distribution of respondents according to civil status.

120
99
100
Frequency

80
60
40
16
20 5
0
single married widowed

Civil status

34
4. Educational attainment and years of schooling
Most of the respondents (80%) reached post high school level education as
shown in Figure 5. Some of the respondents (5.83%) also had post-graduate
education. Sixteen respondents (13.33%) reached high school level education and
eight respondents (6.67%) only attained elementary level education

Figure 5. Distribution of respondents according to educational attainment.

120
96
100
Frequency

80
60
40
16
20 8
0
grade school level high school level p ost high school
level

Educational attainment

The distribution of respondents according to years of schooling shown in Figure 6 is

related to the distribution of respondents according to educational attainment shown
in Figure 5. Majority of the respondents had 14 years of schooling since most of them
finished their college level. The respondents who had more than 14 years of
schooling were those who proceeded with a post graduate degree. Respondents who
had less than eight years of schooling were those who reached grade school level.

35
Figure 6. Distribution of respondents according to years of education.

17-20 4
Years of schooling
13-16 85

9-12 23

4-8 6

1-4 2

0 15 30 45 60 75 90
Frequency

5. Household Size
In this study, household refers to the number of persons who is sleeping in the
dwelling unit and has common arrangements for the preparation and consumption of
food. As shown in Figure 7 below, most of the respondents had five to six members.
The average household size of the respondents was 5.23.

Figure 7. Distribution of respondents according to household size.

70
59
60
50
Freqency

40 33
30
17
20
8
10 3
0
1-3 4-6 7-9 10-12 13-15
Household size

6.
Socio-economic class
Table 1 shows the socio-economic classification of the respondent households.
In this study, household income refers to the accumulated monthly income of the

36
earning household members, income from farms (if any), and the monthly pension
received by any retired household members.

Table 1. Socio-economic classification of respondent households.

Income Group Frequency Percent
AB 40 33.33
C1 15 12.50
Broad C 25 20.83
D 17 14.17
E 23 19.17
Total 120 100.00

According to the AC Nielsen (as cited in Concepcion, 2005), AB Households

in Mindanao are characterized as those households earning PhP50, 000.00 per month
or above, residing in subdivisions with concrete structure and complete utilities. They
frequently occupy top positions in companies or owner of their own businesses. AB
category is also called the high income class. Households under C1 category can also
be called as upper middle class. They earn PhP30,000.00 to PhP49,999.00 per month,
usually live in subdivisions with homes having a mixture of concrete and wooden
materials. The heads of households are usually middle management and junior
executives. Broad C or the lower middle income class households earning
PhP15,000.00 to PhP29,000.00 per month, residing in generally less expensive houses
with basic amenities. Household heads in Broad C usually have occupations like
office workers, government employees and rank and file. Households under the D
class category have an income of PhP8,000.00 to PhP14,999.00 per month, living in
houses located in the less expensive part of the city which are made of a mixture of
cement and recycled materials, smaller in size. Members of the household have
occupations such as blue-collar jobs, tricycle drivers, factory workers and the like.
The E households are those who hardly have enough, earning irregularly. These
households have a monthly income of PhP8000.00 or less and their jobs are typically
not regular or earns too little. Households under this category are also below the
poverty threshold of PhP5000.00 per month.
Since this study aimed to compare the responses for each income group, high,
middle and low income classes have the same number of respondents. In this study,
AB class is the high income class, C1 and Broad C categories comprise the middle

37
class, and D and E categories are classified as the low income class. Of all the
respondents, 40 respondents (33.33%) are under the AB category, C1 category had 15
respondents (12.5%), Broad C category had 25 respondents (20.83%), D category had
17 respondents (14.17%), and E category had 23 respondents (19.17%).

B. Awareness Levels
During the personal interviews, the respondents were asked regarding their
level of awareness about organic rice, and the concepts of sustainable agriculture,
pesticide residues and water pollution. In this study, the ‘never heard’ response of a
respondent meant that the respondent never had any idea of the word concept. The
‘know word’ answer meant that the respondents had at least heard of the
word/concept or that the respondent had elicited different description of the
word/concept. On the other hand, the ‘know well’ response indicated that the
respondents not only heard of the word/concept but also can fully describe or define
the word/concept.

1. Awareness regarding organic rice

As shown in Figure 8 in the next page, 27 respondents (64%) have at least

heard of the word organic rice. This result can be related to the study done by Ara
(2003) which indicated that almost half of the respondents in Manila had heard the
word organic rice while it was 33% in Naga and another study showed that none of
their 378 respondents was aware of organic rice (Xavier University, 1995 as cited in
Ara, 2003). It can be said that the result may be an outcome of the rapid growth of
organic agriculture in the Philippines.

Figure 8. Awareness regarding organic rice.

38
 36%

yes
no

64%

On the average, it can be observed that high income class had the highest
frequency of respondents having heard of organic rice (70%), followed by the middle
income class (65%), and low income class (57.5%) as shown in Table 2. Among the
respondents who had heard of organic rice, it was the high income class respondents
who knew well the word organic rice (12) compared to the lower income classes (6).

Table 2. Knowledge levels of respondents about organic rice.

Knowledge
about ALL LOW MIDDLE HIGH
organic rice n % n % n % n %
Never heard 43 35.83 17 42.5 14 35 12 30

Know word 52 43.33 17 42.5 19 47.5 16 40

Know well 25 20.83 6 15.0 7 17.5 12 30

Total 120 100 40 100 40 100 40 100

2. Knowledge regarding sustainable agriculture

Table 3 shows the distribution of responses regarding knowledge on
sustainable agriculture. Thirty-four respondents (28.33%) never heard of the word
sustainable agriculture while the rest have heard of the word sustainable agriculture.
Fifty-nine respondents (49.17%) knew the word and 27 (22.5%) know the word well.
On the average, most of the high income class respondents knew the word (50% knew
the word and 32.5% know well the word) compared to the lower income classes.

Table 3. Knowledge level of respondents about sustainable agriculture.

39
 Knowledge
regarding ALL LOW MIDDLE HIGH
sustainable
agriculture n % n % n % n %
Never heard 34 28.33 15 37.5 12 30 7 17.5
Know word 59 49.17 19 47.5 20 50 20 50.0
Know well 27 22.50 6 15.0 8 20 13 32.5
Total 120 100 40 100 40 100 40 100

3. Knowledge about pesticide residues

Eighty-eight percent of the respondents knew the word and knew well the
word pesticide residues while 22% never heard the word pesticide residues, as can be
seen in Table 4. Taking into account the proportion of those who knew the word well,
the results indicated that high income had the greater proportion (37.5%) in contrast
with low and middle income classes which both had 27.5% proportion.

Table 4. Knowledge levels of respondents about pesticide residues.

Knowledge about ALL LOW MIDDLE HIGH
pesticide residues n % n % n % n %
21.6 30. 25.
Never heard 26 7 12 0 10 0 4 10.0
47.5 42. 47.
Know word 57 0 17 5 19 5 21 52.5
30.8 27. 27.
Know well 37 3 11 5 11 5 15 37.5
Total 120 100 40 100 40 100 40 100

4. Knowledge regarding water pollution

Table 5 next page shows the responses on knowledge levels about water
pollution. Fifty-three respondents knew the word water pollution (44.17%) and 52
respondents knew well the word water pollution (43.33%). On the other hand, fifteen
respondents (12.5%) never heard of the word water pollution. It can be observed that
the middle and high income classes have the same percentage (10%) that never heard
of the word water pollution. Seven respondents (17.5%) of the low income class
never heard of the word water pollution.
40
Table 5. Knowledge levels of respondents about water pollution.
Knowledge
regarding ALL LOW MIDDLE HIGH
water pollution n % n % n % n %
12.5 17. 10.
Never heard 15 0 7 5 4 0 4 10.0
44.1 47. 47.
Know word 53 7 19 5 19 5 15 37.5
43.3 35. 42.
Know well 52 3 14 0 17 5 21 52.5
Total 120 100 40 100 40 100 40 100

With the findings regarding the knowledge about sustainable agriculture,

pesticide residues and water pollution, it can be said that out of all the respondents, 34
respondents (28.33%) never heard of the word sustainable agriculture, 26 respondents
(21.17%) never heard of pesticide residues and 15 respondents (2.55%) never heard of
water pollution. The results showed that, among the three concepts, water pollution
was the most familiar concept for them because this concept, even not related to
organic rice farming, is the one that is usually included in the news, seen in
televisions or newspapers in the Philippines as compared to the other concepts.

C. Attitudinal Characteristics

1. Past experience of purchasing organic rice

Of all the respondents, only 27 of the respondents (22.5%) had experienced

purchasing organic rice and 93 (77.5%) never experienced buying organic rice as
shown in Table 6. Majority of those who had experienced consuming organic rice
were from the high income class with 15 respondents (37.5%) compared to the lower
income classes with 6 respondents (15%) in each class. This result can be due to the
ability of the consumers to pay the price premium of organic rice. Wealthier
consumers are likely to afford the price premium of organic rice which can be
associated why high income class respondents were the ones who had experienced
buying organic rice.

41
Table 6. Respondents’ past experience of purchasing organic rice
Experienced
purchasing of ALL LOW MIDDLE HIGH
organic rice n % n % n % n %
Yes 27 22.5 6 15 6 15 15 37.5
No 93 77.5 34 85 34 85 25 62.5
Total 120 100 40 100 40 100 40 100

2. Importance attached to price

As shown in Table 7, among the respondents, 95.83% of them believed that
price is an important factor in purchasing rice. Only one respondent (2.5%) from the
low and high income class and three respondents (7.5%) from middle income class
revealed that price was not an important factor in purchasing rice. This result shows
that consumers were price sensitive in terms of buying rice. These results are also the
same with the findings of other studies such as of Piyasiri and Ariyawardana (2002)
and Rodriquez et.al (2007). These studies indicated that majority of their respondents
consider price as a relevant factor in purchasing organic products.

Table 7. Distribution of respondents according to the importance attached to price in

purchasing decisions.
Price is an
important ALL LOW MIDDLE HIGH
factor n % n % n % N %
95.8
Yes 115 3 39 97.5 37 92.5 39 97.5
No 5 4.17 1 2.5 3 7.5 1 2.5
Total 120 100 40 100 40 100 40 100

Those who regarded that price is not an important factor in purchasing rice
mentioned that physical appearance or quality of the rice is more important for them
than the price of the rice. They argued that their basis in buying rice is not just the

42
price but also the physical appearance of it. They would purchase rice if the physical
appearance of it is good and not because of the cheapness of its price.

43
3. Willingness to buy if organic rice is more available
One hundred-two respondents (85%) indicated that they are willing to buy if
organic rice is more available in the market as shown in Table 8. These respondents
revealed that they are willing to purchase at least once. Only four respondents (10%)
of the low income class, 10 respondents (25%) of the middle income class, and four
(10%) of the high income class said that they are not willing to buy if organic rice is
more available.

Table 8. Distribution of respondents according willingness to buy if organic rice is

more available.
Willing to buy if
ALL LOW MIDDLE HIGH
organic rice is
more available n % n % n % n %
Yes 102 85 36 90 30 75 36 90
No 18 15 4 10 10 25 4 10
Total 120 100 40 100 40 100 40 100

4. Importance attached to packaging

As shown in Table 9, among the respondents, 74 respondents (61.67%)
revealed that packaging was an important factor in purchasing organic rice. These
respondents indicated this answer because they thought that packaging was a way for
them to make sure that the rice is really an organic one or not. Those 46 respondents
(38.33%) who considered packaging as unimportant factor indicated that packaging is
not a required feature for organic rice since it only provides an additional cost to the
product that would lead to higher cost of organic rice. It can be observed that there
were only few differences of answers among the three income classes. These findings
contradicted the results found by Piyasiri and Ariyawardana (2002). Their
respondents consider packaging as an unnecessary feature for organic products.

44
Table 9. Distribution of respondents’ according to the importance attached to
packaging in purchasing decisions.
Packaging is
ALL LOW MIDDLE HIGH
an important
factor n % n % n % n %
62.
Yes 74 61.67 25 62.5 25 5 24 60
37.
No 46 38.33 15 37.5 15 5 16 40
Total 120 100 40 100 40 100 40 100

5. Importance attached to certification

Sixty-six respondents (55%) revealed that they were not willing to buy
organic rice if it is not yet certified as shown in Table 10. They said so because they
want to assure that the organic rice that they may purchase has good quality and if it is
really an organic one. The remaining 54 respondents (45%) considered that having a
certification is too costly for the producers and will provide an additional cost that
will lead to higher price of organic rice. These results conform with the findings of
Ara (2003) and Piyasiri and Ariyawardana (2002). The former study indicated that
respondents’ utility increases if certification is available on the product and the latter
study indicated that greater percentage of their respondents who were willing to buy
organic products from supermarkets pointed out that at least a local institute should
certify organic products to assure the quality of products.

Table 10. Distribution of respondents’ according to willingness to buy even if organic

rice is not yet certified.
Willing to buy
if organic rice
is not yet ALL LOW MIDDLE HIGH
certified n % n % n % n %
Yes 54 45 20 50 21 52.5 13 32.5
No 66 55 20 50 19 47.5 27 67.5
Total 120 100 40 100 40 100 40 100

45
6. Respondents’ perception about the involvement of farmers in sustainable
agricultural practices

Sustainable agricultural practices, in this study, refer to the practices which adopt
the goal of ensuring the productive future of agriculture, the environment and the
economy of rural communities. As shown in Table 11, majority of the respondents
(95.83%) believed that farmers should engage in sustainable agricultural practices and
only five respondents (4.17%) did not believe that farmers should engage in agricultural
practices.

Table 11. Distribution of respondents’ according to perception on the farmers’

involvement in sustainable agricultural practices.
Agree that
farmers must
engage in ALL LOW MIDDLE HIGH
sustainable
agricultural
practices n % n % n % n %
Yes 115 95.83 39 97.5 37 92.5 39 97.5
No 5 4.17 1 2.5 3 7.5 1 2.5
Total 120 100 40 100 40 100 40 100

7. Respondents’ belief that chemicals in agriculture have negative effects in the

environment.

One hundred-one respondents (92.5%) believed that chemicals in agriculture have

negative effects in the environment while only nine respondents (7.5%) did not believe
that chemicals in agriculture have negative effects in the environment (Table 12). The
results show that respondents generally believed that chemicals are harmful for the
environment.

Table 12. Distribution of respondents’ belief that chemicals in agriculture have

negative effects in the environment.
believes that
chemicals in ALL LOW MIDDLE HIGH
agriculture have
negative effects in
the environment n % n % n % n %
92. 92.
Yes 111 5 37 5 36 90 38 95
No 9 7.5 3 7.5 4 10 2 5

46
 Total 120 100 40 100 40 100 40 100

8. Regular consumption of rice

As shown in Table 13, majority of the respondents (41.67%) consumed rice at
an average of two kilograms per day. On the other hand, 31 respondents (25.83%)
consumed 1 kilogram of rice per day. Fourteen respondents (11.67%) consumed rice
at 1.5 kilograms per day, while 11 respondents (9.17%) consumed 3 kilograms per
day. Seven respondents (5.83%) consumed rice of less than one kilogram per day.
Only two respondents (1.67%) consumed rice of more than 3 kilograms per day. It is
known that regular consumption of rice of households depends on their respective
household sizes.

Table 13. Distribution of respondents according to daily rice consumption.

Daily rice
consumption ALL LOW MIDDLE HIGH
(kg) n % n % n % n %
<1 7 5.83 2 5.0 5 12.5 0 0.0
1 31 25.83 16 40.0 11 27.5 4 10.0
1.25 1 0.83 1 2.5 0 0.0 0 0.0
1.5 14 11.67 4 10.0 4 10.0 6 15.0
2 50 41.67 14 35.0 14 35.0 22 55.0
2.5 4 3.33 0 0.0 1 2.5 3 7.5
3 11 9.17 2 5.0 4 10.0 5 12.5
4 1 0.83 1 2.5 0 0.0 0 0.0
5 1 0.83 0 0.0 1 2.5 0 0.0

9. Regular price of rice

Many of the respondents (22.5%) usually paid PhP28.00 per kilogram for the
rice that they purchased (Figure 9). Twenty respondents (16.67%) purchased rice at a
price of PhP30.00. Seventeen respondents (14.17%) pay PhP25.00 and another 17
respondents (14.17%) paid PhP27.00 per kilogram of rice. A few respondents
(11.67%) paid PhP29.00; 12 respondents (10%) pay P26.00 for their rice. Six of the
respondents (5%) pay PhP35.00 per kilogram of rice. Two respondents (1.67%) pay
PhP31.00 and another two respondents (1.67%) pay for rice at PhP38.00. Only one
respondent each (0.83%) pays PhP24.00, PhP32.00, and PhP33.00. On the average,
the price of rice purchased by all the respondents is PhP28.29 per kilogram.

47
 Figure 9. Distribution of respondents according to the price of rice regularly
consumed.
30 27

25
20
20
Frequency

17 17
14
15 12

10
6
5 2 2
1 1 1
0 0 0
0
24 25 26 27 28 29 30 31 32 33 34 35 36 37 38
Price/kg

Most of the low income class respondents (25%) paid PhP28.00 for their rice.
Ten respondents of the middle income class (25%) paid PhP25.00 and another 10
respondents (25%) pay PhP28.00. Most of the respondents (32.5%) of the high
income class pay PhP30.00 for their conventional rice.

Table 14. Distribution of respondents according to the price of rice regularly

consumed.
ALL LOW MIDDLE HIGH
Price/Kg n % n % n % n %
24 1 0.83 1 2.5 0 0.0 0 0.0
25 17 14.17 4 10.0 9 22.5 4 10.0
26 12 10.00 8 20.0 1 2.5 3 7.5
27 17 14.17 8 20.0 6 15.0 3 7.5
28 27 22.50 10 25.0 9 22.5 8 20.0
29 14 11.67 6 15.0 6 15.0 2 5.0
30 20 16.67 2 5.0 5 12.5 13 32.5
31 2 1.67 1 2.5 0 0.0 1 2.5
32 1 0.83 0 0.0 0 0.0 1 2.5
33 1 0.83 0 0.0 1 2.5 0 0.0
34 0 0.00 0 0.0 0 0.0 0 0.0
35 6 5.00 0 0.0 2 5.0 4 10.0
36 0 0.00 0 0.0 0 0.0 0 0.0
37 0 0.00 0 0.0 0 0.0 0 0.0
38 2 1.67 0 0.0 1 2.5 1 2.5

48
10. Willingness to pay for organic rice
Shown in Figure 10 is the distribution of respondents according to willingness
to pay for organic rice. More than half of the respondents (56.67%) were willing to
pay a premium for organic rice with varying price premium percentage. The
remaining 43.33% of the respondents were not willing to pay a premium organic rice
in General Santos City.

Figure 10. Distribution of all respondents according to

willingness to pay for organic rice.

not willing to
pay
43%

willing to pay
57%

Table 15 shows the willingness to pay categories and distribution of responses.

Among those who were not willing to pay, the low income class had the highest
number of respondents (65%). Two respondents (5%) of the low and high income
classes and five respondents (12.5%) of the middle income class were willing to pay
less than 10% premium of organic rice. Only one respondent (2.5%) of the high
income class, two respondents (5%) of the middle income class, four respondents
(10%) of the low income class were willing to pay between 10-20% premium. Four
of the respondents (5%) of the high income class, three (7.5%) of the middle income
class, and two (5%) of the low income class were willing to pay between 21-30%
price premium. Two respondents (5%) of the middle income class and three
respondents (7.5%) of the high income class were willing to pay 31-40% premium.
One respondent (2.5%) of the low income class, six respondents (15%) of the middle
income class, two respondents (5%) of the high income class were willing to pay
between 41-50% premium. Moreover, 18 respondents (45%) of the high income

49
class, six respondents (15%) of the middle class, and five respondents (12.5%) of the
low income class were willing to pay up to more than 50% price premium of organic
rice. The results show that, in general, high income class had higher willingness to
pay in contrast with the lower income classes. On the average, respondents who were
willing to pay a price premium, are willing to pay 31-40% price premium for organic
rice.

Table 15. Distribution of willingness to pay responses.

ALL LOW MIDDLE HIGH
WTP category
n % n % n % n %
Not willing to
pay 52 43.33 26 65.0 16 40.0 10 25.0
WTP < 10%
premium 9 7.50 2 5.0 5 12.5 2 5.0
WTP between
10-20%
premium 7 5.83 4 10.0 2 5.0 1 2.5
WTP between
21-30%
premium 9 7.50 2 5.0 3 7.5 4 10.0
WTP between
31-40%
premium 5 4.17 0 0.0 2 5.0 3 7.5
WTP between
41-50%
premium 9 7.50 1 2.5 6 15.0 2 5.0
WTP >50%
premium 29 24.17 5 12.5 6 15.0 18 45.0

11. Reasons for buying organic rice

The 27 respondents who experienced purchasing organic rice were asked

regarding their reasons why they purchased organic rice. Different aspects influenced
their purchasing behavior. As shown in Table 16, the most important reason why
these respondents (81.48% of the 27 respondents who already bought organic rice)
bought organic rice was that the belief that organic rice is good for their health.

50
Table 16. Distribution of respondents according to reasons for purchasing organic
rice.
Reason n %
They are good for my health 22 81.48
They do not contain pesticide or have lower residues 10 37.04
They are good for the environment 9 33.33
They have better taste 6 22.22
I just wanted to try them/try something new 3 11.11
It is trendy/fashionable to buy organic rice 2 7.41
Note: Respondents have multiple responses; n = 27 respondents who had experienced purchasing
organic rice.

Ten respondents (37.04%) indicated that the belief in absence of pesticides or

lower content of residues was one of their reasons why they bought organic rice.
Another essential aspect was the belief that organic farming was good for the
environment (33.33%) and that organic rice had good taste (22.22%). Three
respondents (11.11%) bought organic rice because they wanted to try it and check its
quality or they wanted to try something new. Few respondents (7.41%) purchased
organic rice because they thought organic rice is trendy to buy.

12. Reasons for not buying Organic Rice

The 93 respondents (77.5% of all the respondents) who did not try to buy
organic rice were asked for their reasons why they never tried buying organic rice.
The main reason why the respondents (37.63%) never bought organic rice was that
they did not know what organic means or because they did not have idea regarding
organic (Table 17). Another important reason was that, according to respondents,
organic rice was either too difficult to find (26.88%) or was too expensive (22.58%).
Some respondents (15.05%) did not trust the organic labels thought that organic rice
did not have anything special that was worth a higher price. Other reasons for not
purchasing organic rice not included in the questionnaire were also identified. Seven
respondents (7.53%) mentioned that organic rice was not available in the public
markets, one respondent (1.08%) cited that it was not commercially available and
another respondent stated that only sinandomeng rice2 was consumed by their family.

2
A variety of rice called “laon” meaning “baak” a term called as old rice (Benito, 2009).

51
Table 17. Distribution of respondents according to reasons for not buy organic rice.
Reasons n %
I do not know what organic means 35 37.63
They are too difficult to find 25 26.88
They are too expensive 21 22.58
I do not think it is really organic 14 15.05
I don’t think there is anything special about them which
justifies a higher price 10 10.75
Others
- not available in Public Market 7 7.53
- only sinandomeng variety is consumed 1 1.08
- it is not commercially available 1 1.08
Note: Respondents have multiple responses; n = 93 respondents who never experienced purchasing
organic rice.

D. Willingness to Pay Models

The parameter estimates for each selected product were obtained by applying
a Binomial Multiple Logistic Regression.
Table 18 to 20 below shows the estimated models taking into account all the
respondents of the study as a whole and the different socio-economic classes.
Willingness to Pay Model for the Low Income Class was not shown since there were
no variable was statistically significant. Thus, the models presented show the
estimated parameters only for middle and high income classes and for the overall
respondents.

1. MIDDLE Income Class’ Willingness to Pay Model

In the Table 18 below, only two explanatory variables were found to have
impacts on the willingness to pay for organic rice by the MIDDLE Income Class
respondents – one attitudinal variable (Available, Av) and one socio-demographic
variable (Age, A).

52
Table 18. Logistic regression estimates for the MIDDLE Income Class WTP Model.

Parameter (Odds ratio)

Variable estimate (B) Std Error Wald Stastic p-value Exp(B)
Av 2.384 1.018 5.480 0.019** 10.847
A -0.068 0.036 3.424 0.064* 0.935
Constant -20.054 16096.298 0.000 0.999 0.000
N = 40 (33.33% of the total respondents)
Notes: **5%, *10% significance levels

The regression equation generated was in the form:

WTPM = -20.054 + 2.384 Buy – 0.068 A

Where:

WTPM = Willingness to pay for organic rice among middle

income class respondents
Av = Respondent’s willingness to buy organic rice if it
was more available
A = Age of the household decision-maker

The regression model indicates that the willingness to pay for organic rice
among the MIDDLE income respondents is mainly explained by the availability of
organic rice (Available) since Buy had the highest odds ratio value of 10.847. This
result conforms to the result found by Rodriguez et al. (2007) in which the
AVAILABLE explanatory variable was the one greatly affecting their willingness to
pay for organic rice since respondents purchase organic rice if organic rice were more
available. The odds ratio indicates that holding all other variables constant, a
MIDDLE income class consumer willing to buy organic rice if it is more available is
do so compared to a MIDDLE income class consumer who is not willing to buy even
if organic rice is more available
The age of the MIDDLE income class’ respondents contribute to a lesser
extent to willingness to pay for organic rice. The 0.935 odds ratio for age indicates
that the odds of the willingness to pay for organic rice are more than cut by 0.935 for
every increase in the age of a MIDDLE Income Class consumer. Inverting this odds
ratio, for every one year increase in the age of a MIDDLE Income Class consumer,

53
there is a 0.935 increase in the odds that consumer would not be willing to pay for
organic rice.

2. HIGH Income Class’ Willingness to Pay Model

It can be seen in Table 19 that availability of organic rice (Av), respondent’s

knowledge about pesticide residue (Kpr) and household size (S) had statistically
significant impact on the willingness to pay for organic rice among HIGH Income
Class.

Table 19. Logistic regression estimates for the HIGH Income Class’ WTP Model.
Parameter (Odds ratio)
Variable
estimate (B) Std Error Wald Stastic p-value Exp(B)
Av 5.674 2.547 4.963 0.026** 291.108
Kpr 5.512 2.252 5.990 0.014** 247.536
S 1.109 0.580 3.652 0.056* 3.032
Constant -15.537 6.832 5.172 0.023* 0.000
N = 40 (33.33% of the total respondents)
Notes: **5%, *10% significance levels

The regression equation generated was in the form:

WTPH = -15.537 + 5.674 Buy + 5.512 Kpr + 1.109 S

Where:

WTPH = Willingness to pay for organic rice among high

income class respondents
Av = Respondent’s willingness to buy organic rice if it
were more available
Kpr = Respondent’s knowledge about pesticide residues
S = Household Size

54
 HIGH income class respondents asserted their willingness to pay for organic
rice mainly due to their willingness to buy organic rice if these were more available
(Available) which is the same with the result generated from the MIDDLE Income
Class respondents. The odds ratio indicates that a high income class consumer who is
willing to buy organic rice if it is more available is 291.108 more likely to do so than
a HIGH income class consumer who is not willing to buy even if organic rice is more
available.
The second highest explanatory variable that influenced the HIGH income
class willingness to pay for organic rice was the respondent’s knowledge about
pesticide residues (awareness variable Kpr). HIGH income class consumer who had
more knowledge regarding pesticide residues in rice were 247.536 times more likely
to be willing to pay for organic rice than those HIGH income consumer who had
lesser or no knowledge about pesticide residues.
Household size variable, the only demographic variable that was statistically
significant has an odds ratio of 3.032. This implies that the odds of the willingness to
pay for organic rice of a HIGH income class consumer is increased for every three
additional persons in the household size. Inverting this odds ration, for additional
person in the household size of a HIGH income class consumer, there will be a 3.02
increase in the odds that the consumer would be willing to pay for organic rice.

3. OVERALL Willingness to Pay Model

Four explanatory variables were found to have statistically significant impact
on the willingness to pay for the OVERALL respondents - two attitudinal variables (if
respondent or members of the household purchased organic rice and availability of
organic rice), one awareness variable (respondent’s knowledge regarding pesticide
residues) and one demographic variable (monthly household income). The details are
presented in the table below.

Table 20. Logistic regression estimates for the OVERALL WTP Model.
(Parameter (Odds ratio)
Variable
estimate) B Standard Error Wald Stastic p-value Exp(B)
Pu 1.811 0.722 6.294 0.012** 6.119
Av 2.352 0.737 10.175 0.001*** 10.502
Kpr 0.638 0.317 4.039 0.044** 1.892

55
 (Parameter (Odds ratio)
Variable
estimate) B Standard Error Wald Stastic p-value Exp(B)
I 0.397 0.149 7.076 0.008*** 1.488
Constant -4.001 0.955 17.549 0.000 0.018
N = 120 (100% of the respondents)
Notes: ***1%, **5%, significance levels

56
The regression equation is shown below:

WTPT = -4.001+ 1.811 Purchased + 2.352 Buy + 0.638 Kpr + 0.397 I

Where:

WTPT = Willingness to pay for organic rice among all the

respondents
Pu = If respondent or members of the household
purchased organic rice
Av = Respondent’s would be willing to buy organic rice if
they were more available
Kpr = Respondent’s knowledge about pesticide residues
I = Monthly household income

For the OVERALL Willingness to Pay Model, Av was still the explanatory
variable with the most significant impact on the willingness to pay for organic rice.
Its odd ratio value of 10.502 among indicates that a consumer who was willing to buy
organic rice if it was more available was 10.502 more likely to be willing to pay for
organic rice than a consumer who is not willing to buy organic rice.
The second most important explanatory variable that influenced the
OVERALL willingness to pay for organic rice was the Pu variable (if the respondent
experienced purchasing organic rice) having the odds ratio value of 6.119. This odds
ratio shows that a consumer who had experienced purchasing organic rice before was
6.119 times more willing to pay for organic rice than a consumer who had not tried
purchasing organic rice.
The respondent’s knowledge about pesticide residues (Kpr), an awareness
variable, was the third explanatory variable that had a significant impact on the
willingness to pay for organic rice. Its odds ratio value of 1.892 implies that
consumers who had more knowledge regarding pesticide residues in rice were 1.892
times more likely to be willing to pay for organic rice than those consumers who had
lesser or no knowledge about pesticide residues.
The only demographic variable that was found to have statistically significant
impact on the willingness to pay for organic rice was the monthly household income.
Its odds ratio of 1.488 indicates that consumers who had higher monthly income were
1.488 times more likely to pay for organic rice. In this study, the HIGH income class

57
consumers were more willing to pay for organic rice compared to the lower income
classes.

4. Models’ performance

The Models’ performance is shown in Table 21. The Hosmer and Lemeshow
Test also known as chi-square test is the recommended test for overall fit of logistic
regression model (Garson, 2009). This test can be considered more robust than the
traditional chi-square test. A non-significant chi-square indicates that the variables
included in the analysis fit the model well. As shown in Table 21, each of the models
has a finding of non-significance (MIDDLE – 0.588, HIGH – 0.692, ALL, 0.400) that
signifies that the each model adequately fits the data.

Table 21. Performance of the WTP models.

Hosmer and Lemeshow test
WTP -2 Log Nagelkerke’s R2
MODEL likelihood
Chi-square p-value

MIDDLE 6.743 0.588 31.018 0.588

HIGH 4.421 0.692 19.806 0.692
OVERALL 6.666 0.400 121.732 0.400

It can be seen from the above table that -2 Log Likelihood statistic for each
model is high. The -2 Log Likelihood statistic measures how poorly the model
predicts the decisions, the smaller the statistic the better the model. The WTP model
for HIGH income class with a -2 Log Likelihood statistic of 19.806 can be considered
the best model generated.
Nagelkerke’s R2 can be interpreted like R2 in a multiple regression. Thus only
58.8% of the variation in the MIDDLE income class respondents’ willingness to pay
is explained by the explanatory variables included in the MIDDLE income class’
WTP model. Examining the HIGH income class WTP model, only 69.2% of the
variation of HIGH income class respondents’ willingness to pay is explained by the
explanatory variables included in WTP model. On the other hand, only 40% of the
variability in the OVERALL respondents’ willingness to pay is explained by the
explanatory variables included in the OVERALL Willingness to Pay model.

58
 It can be observed that all the models have noteworthy values of 0.588, 0.692,
and 0.400 for Nagelkerke’s R2. These values may be relatively low but then, having
low R2 values are typically normal since cross-sectional data was used. Low R2 values
may occur possibly because of the diversity of the units in the sample (Gujarati,
2004). Nagelkerke’s R2 can reach a maximum value of one.

59
 Chapter 5
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

A. Summary and Conclusions

The main purpose of the study was to derive the willingness to pay estimates
for organic rice in General Santos City using the Contingent Valuation Method. It can
be said that all of the objectives of this research were attained.
The study utilized some attitudinal, awareness and demographic factors that
may possibly affect the consumers’ willingness to pay for organic rice and subjected
these factors to a Binary Logistic Regression Model (stepwise method). Attitudinal
factors that were considered were the respondents’ attitude towards price, packaging,
and certification, respondents’ past experience of purchasing organic rice, willingness
to buy if organic rice are more available, respondents’ opinion towards sustainable
agricultural practices of the farmers and impact of synthetic chemical in agriculture.
Awareness variables included in the study were respondents’ knowledge regarding
organic rice, sustainable agriculture, pesticide residues and water pollution. The
respondents’ age, gender, household size, number of years of schooling, and monthly
household income (based on income class) were the demographic factors used for the
analysis.
It is concluded that majority of the respondents at least had heard of the word
organic rice. This can be an outcome of the rapid growth of organic agriculture in the
Philippines. However, only few respondents knew well about organic rice.
The Willingness to Pay (WTP) Models for each income class and for the
overall sample were derived in order to compare what factors are given importance by
each income class and the overall sample in determining their willingness to pay for
organic rice. However, LOW Income Class WTP was not generated since no factors
were found to be significant on the willingness to pay for organic rice.
Among the factors considered in the study, the factors that were statistically
significant in determining the OVERALL WTP were the respondents’ past purchase
of organic rice, the respondents’ willingness to buy if organic rice is more available,
the respondents’ awareness regarding pesticide residues, and monthly household
income. For the HIGH Income Class’ WTP Model, the factors that were statistically
significant were the respondents’ willingness to buy if organic rice is more available,
the respondents’ awareness regarding pesticide residues, and household size. Finally,
60
for MIDDLE Income Class WTP Model, only the respondents’ willingness to buy if
organic rice is more available and the respondents’ age were statistically significant.
For the MIDDLE Income Class estimated WTP Model, the respondents’
willingness to buy if organic rice is more available had the greatest impact. On the
other hand, the age of the MIDDLE income class’ respondents contributed to a lesser
extent to willingness to pay for organic rice. The younger the MIDDLE income class
consumer is, the more s/he would be likely to willing to pay for organic rice.
The HIGH Income Class respondents assert their willingness to pay for
organic rice mainly due to their willingness to buy organic rice if it was more
available, followed by the respondents’ awareness about pesticide residues, and the
respondent’s household size. HIGH Income Class respondents who are willing to buy
organic rice will likely to be the ones willing to pay for organic rice. Respondents
who had more knowledge regarding pesticide residues were more likely to be willing
to pay for organic rice. On the other hand, the bigger the household size of HIGH
Income Respondents, the more they are willing to pay for organic rice.
The OVERALL WTP Model considered respondents’ willingness to buy for
organic rice if it was more available as the main variable in determining willingness to
buy organic rice. This signifies that respondents who are willing to buy organic rice if
it was more available are the ones who are more willing to pay for organic rice. The
significance of the second highest explanatory variable (if the respondent experienced
purchasing organic rice) that influenced the OVERALL willingness to pay for organic
shows that consumers who experienced purchasing organic rice before were the ones
more willing to pay for organic rice. The respondent’s knowledge about pesticide
residues, which ranked third that made a great impact on the willingness to pay for
organic rice, implies that consumers who had more knowledge regarding pesticide
residues in rice more willing to pay for organic rice. The last factor, monthly
household income, indicates that consumers who have higher monthly income are
more likely to be willing to pay for organic rice.
For those who had purchased organic rice, the primary reason was the belief
that organic rice is good for their health. The other reasons cited were the
respondents’ belief that organic rice lacks pesticides or has lower content of residues,
that organic farming was good for the environment, and that organic rice had good
taste. Only few respondents indicated that they purchased organic rice because they

61
just wanted to try it and check its quality or they wanted to try something new and
because they think organic rice is trendy to buy.
For those respondents who had not yet tried purchasing organic rice, the main
reasons for not doing so was that they did not know what organic means or because
they did not have any idea regarding organic rice. Other reasons were: organic rice
was too difficult to find, organic rice was too expensive, respondents distrusted the
organic labels in organic rice, respondents thought organic rice did not have anything
special which was worth a higher price, and respondent loyalty to particular rice
varieties.
It is concluded that more than half of the respondents are willing to pay for
organic rice with varying price premium percentage. On the average, respondents,
who were willing to pay a price premium, are willing to pay 31-40% price premium
for organic rice.
Among those who were not willing to pay, the low income class had the
highest number of respondents compared to the higher income classes. When the
researcher already shared what organic rice is, more than half of the respondents were
already willing to pay for organic rice. With the results, the study verified that HIGH
Income Class respondents were the ones more willing to pay and had higher
willingness to pay for organic rice compared to the lower income classes.

B. Recommendations
Based on the descriptive findings of the study, only few respondents knew
well about organic rice and there exist some misconceptions regarding organic rice.
Thus, only respondents who knew very well about organic rice had assessed the
benefits of organic rice. Clear recognition about organic rice is a pre-requisite in order
for the organic rice to break free from its niche product status. Like other similar
studies, pull strategies should be applied to promote organic rice market growth.
Organic market actors must increase consumer “pull” for the expansion of the organic
market. In order to exercise this, the organic market actors must convince themselves
that there exists a growing consumer demand for organic rice and that when they exert
efforts to increase the supply of organic rice this will improve their competitiveness.
Consumer food education for the consumers should be done in order to
facilitate the expansion of organic movement. Coordination among the government,
non-government organizations and private organizations is a must. A long term plan
62
for the organic rice sector is also recommended for the rapid improvement of the
status of organic rice. Some LGUs already advocate organic rice farming but still this
can be regarded as useless if consumers do not apprehend the benefits in consuming
organic rice. Thus, the LGUs or the government as a whole must thoroughly assure an
equal assessment of both supply and demand for organic rice. This can be considered
as a difficult task but this scheme will indeed provide advantages for the consumers
and producers.

Avenues for Future Researches

Researchers may consider this study as a basis for further researches. First,
the study only involved General Santos City as the research area. This study can be
extended to other areas in the Philippines so as to assess and compare willingness to
pay for organic rice.
Secondly, there are other methods in order to determine the impact of factors
on the willingness to pay for a certain new product. This may be considered by future
researchers so as to evaluate what method can be considered as the best method given
that each method has its own strengths and weaknesses.
Lastly, it is recommended to conduct a study considering the side of the rice
farmers such as their willingness to accept to shift from conventional to organic rice
farming since the study had not captured this aspect for some constraints. Better
analysis can be made when both farmers’ and consumers’ willingness to accept and
pay are being studied.

63
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 Appendix 1
SURVEY QUESTIONNAIRE

AWARENESS LEVLES
1. Have you heard of “organic rice”?
___ Yes ___ No
2. Your knowledge about organic rice
___ Never Heard
___ Know Word
___ Know Well
3. Your knowledge regarding sustainable agriculture
___ Never Heard
___ Know Word
___ Know Well
4. Your knowledge about pesticide residues
___ Never Heard
___ Know Word
___ Know Well
5. Your knowledge regarding water pollution
___ Never Heard
___ Know Word
___ Know Well

REGULAR RICE BUYING INFORMATION

6. Your household’s average consumption of rice per day
____________________
7. Usual price of Conventional Rice bought
____________________

ATTITUDINAL FACTOR
8. Have you or a member of your family ever purchased organic rice?
___ Yes ___ No

68
REASONS FOR NOT BUYING ORGANIC RICE
9. I do not buy organic rice because
___ I do not know what organic means
___ I don’t think there is anything special about them which justifies a higheKpr
price
___ I do not think it is really organic
___ They are too expensive
___ They are too difficult to get
___ others, specify ________________________

REASONS FOR NOT BUYING ORGANIC RICE

10. I buy organic rice because
___ They have better taste
___ They are good for my health
___ They do not contain pesticide or have lower residues
___ They are good for the environment
___ I just wanted to try them/try something new
___ It is trendy/fashionable to buy organic rice
___ others, specify ________________________

WILLINGNESS TO PAY
11. Are you willing to pay a price premium for organic rice?
___ Yes ___ No (Proceed to no. 13)
12. By how much are you willing to pay for organic rice?
___ < 10%
___ 10 – 20%
___ 21 – 30%
___ 31 – 40%
___ 41 – 50%
___ > 50%

ATTITUDINAL FACTORS
13. Are you willing to buy organic rice if they are more available?
___ Yes ___ No
14. Will you buy organic rice even if it is not yet certified?
___ Yes ___ No

69
 15. Do you agree that farmers should engage in sustainable agricultural production
practices?
___ Yes ___ No
16. Do you believe that the use of synthetic chemicals in agriculture has negative effect
on the environment?
___ Yes ___ No
17. Is price an important factor in purchasing rice?
___ Yes ___ No
18. Is packaging of rice important to you?
___ Yes ___ No

SOCIO-ECONOMIC AND DEMOGRAPHIC FACTORS

Name: _______________________________________
Sex: ___ Male ___ Female
Civil Status:
___ Single
___ Married
___ Widow(er)
Age: _______________
Household Size: _______
Educational Attainment
___ Elementary
___ High School
___ College
Number of years of schooling: _________
Occupation: ________________________
No. of working household members: ________
Monthly household income:
___ more than P50,000 per month
___ 30,000 to 49,999 per month
___ 15,000 to 29,999 per month
___ 8,000 to 14,999 per month

70