2009

VALUE CHAIN
ANALYSIS OF THE
NEGROS
MUSCOVADO
INDUSTRY

A study commissioned
by ICCO

Prepared by: IVAN IDROVO and MARIAN BOQUIREN

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STRATEGIC DEVELOPMENT COOPERATION, ASIA (SDCAsia)
 TABLE OF CONTENTS

COTETS PAGE
O.
EXECUTIVE SUMMARY 5
1. EGROS’S POSITIO I THE PHILIPPIE MUSCOVADO 17
IDUSTRY
A. MUSCOVADO PRODUCTION 17
B. IN MAJOR MARKET SEGMENTS 17
2. CHARACTERISTICS OF THE MUSCOVADO VALUE CHAI I 19
EGROS
A. PRODUCTS 19
B. PRODUCTION TREND 20
C. VALUE CHAIN PLAYERS 21
D. FIRM LEVEL UPGRADING 33
E. INTER-FIRM COOPERATION 42
3. ED MARKET AALYSIS 45
A. EXPORT MARKET TRENDS 45
B. DOMESTIC MARKET 46
C. MARKET STANDARDS/REQUIREMENTS 48
4. SUPPORT MARKET 50
A. PROVIDERS 50
B. DONOR PROGRAM 53
C. RECOMMENDED PROVIDERS (from ICCO commissioned study) 53
5. EABLIG EVIROMET
A. ON SUGAR TARIFF AND TRADE LIBERALIZATION 55
B. LEVY IMPOSED ON SMALL FARMERS 55
C. GOVERNMENT SUPPORT FOR THE MUSCOVADO INDUSTRY 56
D. DOMESTIC SUGAR SUPPLY 56
E. ON FARM SIZE 56
6. GEDER ISSUES 57
A. GENDER DIVISION OF LABOR 57
B. ACCESS AND CONTROL OVER RESOURCES 58
7. COSTRAITS AD OPPORTUITIES 59
A. OPPORTUNITIES 59
B. CONSTRAINTS 60
8. UPGRADIG STRATEGIES/ITERVETIOS 63

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 ACRONYMS
AECID Agencia Española de Cooperación Internacional para el Desarrollo
AFTA-CEPT ASEAN Free Trade Area–Common Effective Preferential Tariff
AHSSI Asociacion de Hacenderos de Silay-Saravia, Inc.
APSSI Associated Planters of Silay-Saravia, Inc.
ARB Agrarian Reform Beneficiary
ARC Agrarian .Reform Community
ASEAN Association of Southeast Asian Nations
ATF Alter Trade Foundation
ATG Alter Trade Group
ATI Alter Trade Inc.
ATM Alter Trade Manufacturing Corp.
BDS Business Development Service
BFAD Bureau of Food and Drugs
BNF biological nitrogen fixation
CADP Central Azucarera Don Pedro
CARP Comprehensive Agrarian Reform Program
CIDA Canadian International Development Agency
CITEM Center for International Trade Expositions and Missions
CSR Corporate Social Responsibility
DA Department of Agriculture
DAR Department of Agrarian Reform
DOST Department of Science and Technology
DTI Department of Trade and Industry
EDC Export Development Council
EU European Union
FARM Inc. Federation of Agricultural Resource Managers, Inc.
FOB Freight on Board
FSDC Farm Systems Development Corporation
GAP Good Agriculture Practices
GMP Good Manufacturing Practices
HACCP Hazard Analysis and Critical Control Point
HYV High Yielding Variety
ICCO Inter-Church Organization for Development Cooperation
LCARB MPC La Castellana Agrarian Reform Multipurpose Cooperative
LGU Local Government Unit
LKg/TC 50 Kgs per Ton Cane
LTO Land Transportation Office
MC Moisture Content
MD Man Day
MDCC Mill District Development Council
MFI Micro Finance Institution
MPC Multipurpose Cooperative
MT Metric tons
MUAD Multi-sectoral Alliance for Development
NIRD Negros Oriental Institute for Rural Development
OCCP Orgnaic Certification Center of the Philippines
OPTION MPC Organic Producers in the Island of Negros Multipurpose Cooperative
PCCI Philippine Chamber of Commerce and Industry
PDAP Philippine Development Assistance Programme, Inc
PEDP Philippine Export Development Plan

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PhilDHRRA Philippine Partnership for the Development of Human Resources in Rural Areas
PHILSURIN Philippine Sugar Research Institute
PHILSUTECH Philippine Sugar Technologists Association
PhP Philippine Peso
PO People’s Organization
PRIME Promoting Rural Industries and Market Enhancement Program
PSMA Philippine Sugar Millers Association Inc.
R&D Research and Development
SAP Sugar Alliance of the Philippines
SDCAsia Strategic Development Cooperation Asia
SRA Sugar Regulatory Administration
TFM Task Force Mapalad
UMFI Upland Marketing Foundation, Inc.
UNIFARMS United Farmers Association of Negros – South Inc.
UNIFED United Sugar Planters Federation
USDA United States Department of Agriculture

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 EXECUTIVE SUMMARY

Muscovado Production

Muscovado was one of the most prominent export commodities of the Philippines, especially from the
Negros region from the 1800s until the late 1970s. Last year, it is estimated that Negros Occidental
produced around 2330 -2430 MT of muscovado. This comprised about 20% of the total Philippine
production. With two to three sugar mills diversifying to muscovado production, it is projected that
Negros Occidental would be the top muscovado producing province in the coming two to three years.

Based on the 1,735-ton national muscovado export in 2008, Negros Occidental accounted for 77% of
the Philippines export or about 1420 MT. It appears that Negros is geared towards the export market
with Alter Trade taking the lead.

There are 8 muscovado mills in Negros Occidental with a combined monthly production capacity of
499 MT per month. To date, only 5 of the 8 mills are operating with an aggregate capacity of 337 MT
per month.

Products

Muscovado is a type of unrefined sugar with a strong molasses flavor. It is also known as “Barbados
sugar" or "moist sugar". In Negros Occidental, muscovado can be found in three product formats: a)
amorphous muscovado sugar crystals b) muscovado rocks c) muscovado cookies. These products are
sold in all major malls, pasalubong and novelty centers within the province.

With the current hype for organic and health- conscious lifestyle, muscovado industry has been
revived. Muscovado sugar has nutrient content comparable only to pure bees’ honey. Likewise it is
popularly recognized as natural and highly nutritious because of its low calorie content as compared
to other manufactured sugar.

Value Chain Players

Input suppliers

• Fertilizer suppliers may be divided into 2, the commercial fertilizer suppliers and dealers and the
organic fertilizer producers.
• Small and large planters vary in their requirement for seedling supply, in such a way that small
planters practice ratooning, while the large planters buy their seedlings every cropping.
• Equipment used in muscovado processing particularly the cane crushers can be sourced from
three main types of suppliers: old cane crushers, locally fabricated crushers and those imported
from India.

Sugarcane Farmers

Sugar comprises 55% of the land use in Negros Occidental, thus accounting for its largely monocrop
character. 2007 statistics from SRA indicate that there are about 11,926 farms which are tilled by
13,742 farmers. Of the 13,742 farmers, 57% have farm sizes of less than 5 hectares. As of 2006,
5,191.72 hectares have been distributed to 4,459 agrarian reform beneficiaries (ARBs). Average farm
size per beneficiary is about 1.16 hectares. CARP’s implementation under the current modalities in
sugarcane plantation areas is considered to be the most problematic in terms of land distribution.

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 Small sugar planters have limited capacity to implement recommended production techniques. Their
yield ranges from 40 to 60 tons sugarcane per hectare. Medium and large sugar cane planters have the
capacity to utilize all necessary input materials, irrigation and production technologies. Average yield
of plantations is about 80-100 tons sugarcane per hectare.

Muscovado Millers/Processors

There are 5 operational muscovado mills in Negros Occidental: Alter Trade Manufacturing Inc.
(affiliate of the Alter Trade Group), Sagay Sugar Central, Philippine-Hawaiian Co., La Castellana
ARB MPC and Task Force Mapalad and Seed Trade. Of these 5 operational mills, three are stand-
alone muscovado mills while the two other mills are conventional sugar mills that have expanded into
muscovado production. There are also 4 mills that are being set up but not yet operational as of
October 2009. Of the 5 processors, Alter Trade, Sagay Sugar Central and Phil.-Hawaiian Co. are
currently exporting directly to foreign buyers and/or indirectly thru local exporters.

Traders/Distributors

Manila-based distributors include Upland Marketing Foundation Inc. (UMFI) which require 3 tons of
muscovado per month, Sharmila Inc. (36 tons per month), Peotraco Industries Inc. (18 tons per
month) and TFN Far East Inc. (has stopped purchasing from Negros this year). Foreign buyers include
Alter Trade’s Fair Trade/People-to-People Trade/Organic markets from Germany, Switzerland,
France, Austria, Japan, Korea and Malaysia.

Firm Level Upgrading

1. Sugar Cane Farming

Although there was a 37% overall increase in farmers with a 68% increase in smallholders (less than 5
hectares), average farm size of smallholders decreased from 3.16 hectares in 2002 to 2.09 hectares in
2007. As per studies conducted, a sugarcane farm requires at least 5 hectares to be competitive in the
global economic environment.

Small planters produce only 40 to 60 tons sugarcane per hectare. This is very low when compared to
the yields of medium and large farms which range from 80 to 100 MT per hectare or to potential cane
yields (120 to 150 tons/ha) achieved in Brazil, India, South Africa and other regions growing
sugarcane with drip irrigation and fertigation. Therefore, new and innovative sustainable technologies
are needed to raise and sustain sugarcane productivity per hectare.

Farm Size Knowledge and Technology Analysis of Effect of Differences

Medium/Large • Application of recommended rate of • Small planters produce only
Planters fertilization 40 to 60 tons sugarcane per
• With irrigation hectare, while big planters
• Trained agriculture technicians – have yields of 80 to 100 tons
attends SRA trainings and has per hectare
extensive experiences • Production cost of big
• New planting materials every planters is about PhP50,000
cropping per hectare. Production cost of
Small Planters – small planters is about
• Minimum fertilization
PhP25,000 to 30,000 per
conventional farming • Rainfed

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 • New planting materials every 3 hectare.
cropping • Small organic farmers have an
• Usually agrarian reform beneficiaries average cost of PhP 45,000
Small Planters/POs • Utilization of Organic fertilizer at per hectare with yields of 57
of Altertrade – recommended rate of application tons per hectare.
organic farming • New planting materials every 3
system cropping
• Usually agrarian reform beneficiaries

A major criticism of the agrarian reform program is the lack of support services to the ARBs. The
recent study conducted by the provincial government of Negros Occidental revealed that 97 percent of
the approximately 100,000 beneficiaries (all crops) in the province claimed they have not received
any support services from the government. Furthermore, 80 percent also said they have not increased
their productivity due to lack of support services, while 70 percent believe they have not obtained any
economic gain from CARP. Another group of beneficiaries in Northern Negros claimed they are not
economically better off now that they have their awarded lands than when they were still employees
of their former landowner 20 years ago. In many cases, awardees have leased back their lands to
former landowners.

Based on the costs and returns of the various cultivation strategies employed in Negros Occidental, it
appears that the intensive farming operation has the highest net income but has the lowest return on
cost at 87%. Organic farming has the second highest net income as well as return on cost at about
94%. The low intensity cultivation used by small planters has the least net income but has the highest
return on cost at more than 100%.

2. Muscovado Processing

Cane should be milled within twenty-four (24) hours from cutting to maintain high sugar content. It
is, therefore, important that suppliers are contracted to supply cane at given times. This enables the
plant to work continually while minimizing the time harvested cane is allowed to stand.

The efficiency with which juice can be extracted from the cane is limited by the technology used.
While the upgraded sugar mills can extract between 95 and 98% of the cane juice, the old fashioned
sugar mills (one tandem) only extracts 60% to 65% of the cane juice. Alter Trade has a three tandems
dry crushing and is able to extract 80% to 85% of the cane juice. Yields can also be improved by
careful control of the boiling process.

Upgrading from direct heating to use of steam will also improve efficiency and reduce costs. Below is
the comparison on efficiency between direct heating vis-à-vis steam.

Direct Heating/Firing: Old Technology Steam: ew Technology

Hard to control temperature Temperature can be controlled
Bagasse or bamboo as fuel Efficiency of fuel
Needs 15 cubic feet bamboo per 30 ton cane Needs 10 cubic feet bamaboo per 60 ton cane

The next table is a summary of the differences and 2 types of muscovado milling and processing
plant in Negros Occidental, namely: a) open pan direct to the furnace – small scale/conventional
process; and b) Using steam jacketed kettles – large scale/upgraded.

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Summary of Differences Advantages of Upgraded Technology
Processors using open pan processing - The closed pan processing reduces the
- Uses only open vats for preheating and cooking risk of contamination from
- No evaporators and dehumidifiers impurities
- Does no use steam for heating - Fewer human contact; thus, reducing
- Fewer filters along the process contamination
- Does not use pumps for transporting the syrup/juice - Those using closed pan processing
from process to process have cleaner facilities
- Uses one crusher - The highly upgraded facility has more
- Does not have its own weighing scale; instead, it uses juice extraction efficiency due to
the scales of transloading stations of sugar central the more efficient system of
- Does not use metal detectors to reduce risk of having crushing the canes
metallic impurities
Processors using both open and closed pan processing
and other upgraded facilities (highly upgraded facility)
- Uses steam-jacketed kettles for final cooking
- Has evaporators and dehumidifiers
- Uses steam to for heating
- Has many filters along the process
- Uses pumps to transfer juice/syrup from process to
process
- Uses series of crushers with cutters
- Has its own weighing scale
- Uses metal detectors to reduce risk of having
metallic impurities

Interfirm Cooperation

Horizontal Collaboration Vertical Relationship

Farmers Muscovado Millers Farmers – Muscovado Millers
Information Sharing and Transparency
Information sharing appears to Some degree of information Small millers provide information to
be spontaneous between sharing especially on their farmer-members on price, cost,
farmers of same sizes but is technology but people are demand, and standards from the
generally very limited between still very guarded in giving miller.
big farms and the small farms. out market info and what
they consider as their “trade For conventional sugar millers cum
secrets” or competitive muscovado processors, information
edge. shared is primarily on current market
Not so much interaction price of canes and the standards ---
between processors basic info required in procurement
(particularly between big transactions.
and small) except during
meetings initiated by
government agencies and
PDAP.
Conventional sugar millers
who have diversified into
muscovado tend to share
information more readily

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 Horizontal Collaboration Vertical Relationship
Farmers Muscovado Millers Farmers – Muscovado Millers
with each other.
From the interviews and
workshops, it was apparent
that millers have different
perspectives on what is a
“good quality” muscovado.
Although there exist a draft
standard for muscovado,
this has not yet been fully
disseminated for final
drafting and to ensure
consistent interpretation.
Value Added Services/Cooperation and Collaboration
Main framework for PDAP has initiated the Up till the present, many of the
cooperation and collaboration establishment of the farmers and workers already
is through the agrarian reform muscovado association in awarded with land titles have opted
communities organized by Negros. To date, though, to sell their land and/or stay under
DAR. However, majority of the group is not yet fully the patronage of their landlords.
the ARCs are weak and in functional and activities
need of organizational were confined to Alter Trade provides the following
development support. From organizational meeting. services to partner communities:
the interviews conducted, it production credit (payable after
would seem that the better harvest), training/technology
ARCs/farmer organizations are transfer, and organizational
those supported by Alter development. TFM also provides
Trade. loan for their members.

The ability of the

sugar farmer-beneficiary to sustain
the land by himself/ herself or with
his/ her cooperative’s support is
again especially crucial in Negros
Occidental, where the patron-client
relationship is so deeply embedded
in the culture and has made the
farmer very much dependent on
his/her landlord to this day.
Supplier and Buyer Selection and Procurement Process
Main market of farmers is still Main suppliers of Altertrade and
the conventional mill. In TFM are their members. When these
terms of price and financial mills have enough supply or have
income, there is no significant suspended temporarily their
difference between selling to operations, the member-farmers sell
muscovado mills and to the conventional mills. Others
conventional mills. Main who are under the assistance or are
difference is on the terms of partners of the muscovado millers
payment. Muscovado millers (e.g., partner communities of the
generally pay upon delivery. Alter Trade Manufacturing Inc. and

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 Horizontal Collaboration Vertical Relationship
Farmers Muscovado Millers Farmers – Muscovado Millers
the Task Force Mapalad) are the
main suppliers of such mills.
However, in instances where the
mills are out of service or are in full
capacity, the partner suppliers may
opt to mill in conventional sugar
centrals. Alter Trade schedules their
procurement of canes from the
different groups that they are
supporting.

For conventional cum muscovado

plants, they source from own farms
(leased/owned).

End Market Analysis

1. Export Market

According to the commodity factsheet (2007) of the Department of Agriculture, a total of 1,815.04
metric tons of muscovado was exported to different countries with an aggregate value of PhP 101.84
million. Main countries of destination were Japan (28.7%), Germany (19.7%) and Italy (1.2%). In the
same year, 13.60 metric tons of Panocha (similar to sangkaka) was exported to the United States
(54.1%), Canada (18.2%) and United Kingdom (12.3%) with a total value of PhP1.1 million. There
was a 54% increase in the volume of exports in 2007 over 2006 performance. In 2008, export volume
decreased by 11% over 2007 figures.

In a report from the Sugar Regulatory Agency, the top muscovado importing countries for 2008 were
Germany (27%), Japan (22%), Switzerland (19%) and Italy (18%). Other importing countries include
USA, France, South Korea, Canada, Saudi Arabia and Malaysia.

2. Domestic Market

Data from BAS shows that prices of refined sugar have increased to PhP 42-48 per kilo as of 10
December 2009 from PhP 42-46 as of last week of November and PhP 39 – 42/kg as of same period
last month. The domestic market is experiencing tightness in refined sugar supply, as traders started
stocking up last month ahead of the holiday season and in the face of rising prices.

The processed food sector can potentially be a market for muscovado especially those that intend to
diversify into the organic market. However, product and market development would require intensive
collaboration between muscovado processors and the processed food exporters and investment.
Likewise, price competitiveness of muscovado vis-à-vis other substitutes has to be improved.

Phone interviews were conducted with 46 supermarkets and food establishments in Metro Manila.
The food establishments consisted of restaurants, hotels, coffee shops and bakeshops. 85% of the
respondents said that they are buying muscovado while 15% are non-users/buyers of muscovado.
Reasons given for non-purchase/non-use of muscovado sugar were the following: a) expensive

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compared to brown sugar; and b) does not have the needed sweetness compared to white sugar.
Another respondent claimed that the product was perceived as not clean.

90% of the supermarket respondents were purchasing muscovado of different brands. Most common
brands purchased were AlterTrade and Hawaiian. Among the food establishments, 100% of the
bakery shop respondents were aware of muscovado and purchase the products on a monthly basis at a
volume of 10kg per month.

Restaurants are seasonal purchasers of muscovado depending on recipes and festivities. 83.5% of the
interviewed coffee shops are seasonal buyers, purchasing only when customers demand the product
and at an average of 1-2kg per month. 55% of hotels purchase less than 10kg while 18% purchase the
products on a seasonal basis. 27% of hotels said that they only purchase muscovado depending on the
requirements of the kitchen and this is on an irregular basis.

For supermarkets, responses with regards to volume are varied. 33% of the respondents have an
average monthly volume of 100kg while the other 33% responded to have a monthly purchase volume
of 10kg. Generally, processors have difficulty selling through supermarkets due to several factors:
supermarkets charges high slot/listing fees; takes too long to pay (about 3 months) and products are
on a consignment basis and returns damaged products to the consignee at the consignee’s expense.

The food establishment respondents stated that they source their muscovado from the supermarket
(82%). Establishments with less than 2kg required volume as well as Hotels purchase their
muscovado from the supermarkets using any brand available.

3. Market Standards/Requirements

General Requirements for Muscovado

Appearance Golden Brown with minimal small lumps and without foreign
materials
Taste and Flavour Sweet and without off flavors
Weight / Packaging In sacks with 50kg or 40 kg weight

The export market is more stringent on its requirements with many buyers needing certifications such
as fair trade, organic, HACCP, GMP and others. They are strict on food safety and sanitation
standards.

Support Market

There are several support services providers operating in Negros Occidental. These include
• Sugar Regulatory Administration (RD&E on farm productivity, laboratory analysis, sugar
regulations, etc)
• Department of Trade and Industry (market development, market info, organizational support, etc)
• Department of Science and Technology (plant and equipment design, GMP, etc.)
• Bureau of Food and Drugs (GMP, BFAD Certification, etc.)
• Negros Muscovado Industry Association (not yet fully operational) (linkaging among
stakeholders)
• Alter Trade Group (technical and credit assistance, muscovado milling, organizational
development, etc.)
• Task Force Mapalad (muscovado milling, technical and credit assistance to ARBs, etc)
• Negros Oriental Institute for Rural Development (NIRD)

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• SIMAG Foundation, Inc. (assistance to the members and heirs of the 2 conventional sugar
associations in Silay-Saravia milling districts)
• the Multi-sectoral Alliance for Development – Negros (through FARM Inc., serves as the
marketing arm of assisted enterprises)
• Philippine Sugar Technologists Association – PHILSUTECH (RD&E activities)
• Philippine Development Assistance Program Inc. (PDAP) (set up of muscovado processing
facilities).

Enabling Environment

Under the ASEAN Free Trade Agreement (AFTA) mechanism, the Common Effective Preferential
Tariff (CEPT) system requires that tariffs levied on commodities traded in the region meeting a 40%
ASEAN content requirement be reduced to 0 to 5% in January 2010. In the case of sugar it is pegged
at 5%. To mitigate the potential negative effects on the impending tariff reduction, sugar companies
are expanding into bio-ethanol production and other sugar cane by-products such as muscovado.

Another issue confronting small sugar landowners is the move of the SRA to continue imposing a
levy of PhP 2 (three cents) per kilogram of sugar produced. Sugar Order no.2 Series of 1995-1996
provided for a lien of Php 2.00/l kg bag on all sugar produce in favor of PHILSURIN. It is due to
expire 31 August 2005. The SRA’s Sugar Order No.8, Series of 2004-2005, issued August 18, 2005
provides for the continuity of Sugar Order No.2.

Musocvado was identified among the Revenue Streams in the Product Strategies of the Philippine
Export Development Plan from 2004-2007 and from 2008 to 2010. The PEDP is prepared by the
Export Development Council (EDC) under DTI. Main focus was to adopt organic certification
standards with guidance from DA-BAFPS.

To ensure adequate domestic sugar supply while maintaining a strategic balance conducive to a stable
and viable market environment and to enable the timely and effective merchandising of Philippine
sugar, the adjustments on sugar allocations at the start of crop year 2009-2010 were promulgated by
the SRA.

Too many CARP beneficiaries share on the land they work on, thus the three-hectare maximum share
per beneficiary was not often met under Republic Act 6657 or the Comprehensive Agrarian Reform
Law of 1988.

Gender Issues

While both men and women in sugar cane farming households engage in labor both productive and
reproductive and while these work burdens take up the greater part of the 24-hour day (sometimes up
to 15 hours of labor for both men and women), the labor undertaken by men is privileged in that it has
more monetary value as well as psychological value. For example, manual weeding, which is usually
done by women, is paid only about half of the daily wage paid to men.

In muscovado processing, women are involved in post-processing activities particularly packing.

They are paid by piece or by “pakyao (bulk) system. Men are preferred for processing activities
because these are physically-demanding tasks.

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Women's actual contribution to sugar cane production and rural economy remains undervalued if not
invisible. As a result, women have less access to productive resources than men do. Access to land,
technology, extension services, capital, and infrastructure support tend to favor rural men.

Households associated with sugar production require other sources of income for their livelihood,
generally provided by the off-farm employment or family farming of female family members.
However, women on the plantation have limited access to resources for production and, therefore,
income. They do, however, have sufficient time to engage in diversified sugar-based food production
and livelihood activities.

Constraints and Opportunities

1. Opportunities:

Negros muscovado products particularly those from Alter Trade and Hawaiian Philippines are
recognized by distributors, retailers, and institutional buyers to be of premium quality. Likewise, the
province is known as the “sugar bowl of the Philippines” and has a long tradition as the home of
innovative and export quality products (gifts and housewares/ food products). For the Negros
muscovado industry to significantly expand its market share in the muscovado trade, it has to focus on
product differentiation parallel to improving efficiency to boost competitiveness and profitability for
all players.

The presence of established exporter such as Alter Trade and conventional sugar mills expanding into
muscovado production can facilitate the entry of small scale millers into the export markets through
consolidated marketing and vertical integration or network relationships.

Industrial food processors with natural/organic/healthy food product lines are potential target markets.

2. Constraints

a. Limited access to financial and non-financial services to facilitate upgrading

Extension services are mainly provided by government which experience pronounced financial
constraints and inability to increase depth and breadth of outreach. There is lack of agricultural
extension workers. This inadequacy limits any extension service to occasional basis rather than the
required sustained regular activities. This may also explain why ARBs generally feel that they did not
receive any support services from the government.

The small muscovado mills have difficulties in complying with market standards and to achieve
optimum operations efficiency primarily due to the following: a) Lack of access to technology,
technical expertise, financial, and systems necessary to upgrade products, operations, and practices
that improve productivity and the food safety and quality of products; and b) High cost of certification
and compliance/implementation of corrective measures to structural and operational deficiencies.

b. Lack of entrepreneurial orientation

The lack of entrepreneurial orientation among sugar cane farmers is to a significant extent a reflection
of the perpetuation of the paternalistic relationship common in sugar plantations. It can be inferred
that the fixed social arrangements developed in the hacienda by the landlords centuries ago had
caused the shadow of paternalism and dependency in the lives of the farming people.

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c. Lack of economies of scale/Weak horizontal cooperation/Poor organizational dev support

Sugar cultivation requires tractors for deeper plowing; farms that employ carabao-pulled plows yield
much lower harvests. Since using a tractor makes sense if one is cultivating 20 to 30 hectares, small
farmers must get together to hire a tractor; hence, some institutional development is crucial.

Individual procurement of fertilizer for a small farm translates to higher cost per bag. Each hectare
cultivated entails capital requirements ranging from inputs to labor and fixed capital, which may not
be easily put up by an individual farmer.

Generally, small farmers lack entrepreneurial skills and capacity to interact effectively and to
undertake collective action, which is necessary to induce firms to accept a high level of
interdependence.

Similarly, muscovado millers operate in isolation which to a significant extent widens the gap
between the small scale and large scale producers both in terms of quality and market penetration/
market share.

d. Weak supply chain governance

There is a prevalent lack of common understanding of standards and shared responsibility between
and among players which result to costly non-value added steps such as inspection, return of rejects,
and delays in production schedule. Quality perceptions are different among players in the market.

e. Lack of awareness on muscovado among consumers/ No sustained promo and market

development

Although muscovado is now available in many of the leading supermarkets, there is still a low
effective demand for the product. People are generally not aware on the health benefits of muscovado.
Likewise, the image of muscovado as “dirty” (due to poor processing) still persist in the minds of
many consumers. Another factor also that affects commercial viability of muscovado is the presence
of cheaper substitutes. There is also a lack of solid market information as basis in crafting a marketing
strategy.

f. Limited understanding and application of Corporate Social Responsibility (CSR)

There is a lack of know-how among muscovado mills on how to implement CSR as a tool to facilitate
business growth/market development especially for products such as muscovado and, in parallel,
provide more equitable returns to sugar cane farmers and workers.

Upgrading Strategies

To maintain or improve one’s market position, the industry needs to:

• Increase the efficiency of internal processes such that these can be significantly better than
competitors. This will involve integrated actions both within individual links in the chain and
between the links in the chain.
• Introduce differentiated products or improve product quality faster than competitors. This will
involve changing and upgrading of farming and milling technologies and practices both within
individual links in the value chain and in the relationships between different chain links.

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• Improve economies of scale through inter-firm cooperation
• Conduct a unified marketing campaign which will also involve the development and promotion of
specific image and set of product differentiation factors that the Negros muscovado industry as a
whole can introduce and sustain as a marketing proposal.

Below are the specific proposed interventions:

1. Strengthening and/or establishment of sugar cane nurseries

Farmer-based/community-based nursery with strong collaboration with the relevant sugar agencies is
the most appropriate strategy for developing effective sugar cane planting material system in Negros.
Advantages of farmer-based nurseries include its simplicity, accessibility, and cost-effectiveness. This
will involve the identification and production of outstanding varieties.

2. Expansion of pool of community-based trainors on GAP aligned sugar cane farming

Building on the initiatives of ICCO/Kerk en Actie organizations, it is proposed that these

organizations in collaboration with relevant government and sugar organizations to build up
indigenous capacity (within the locality) to delivery training on GAP aligned sugar cane farming
rather than delivering the services themselves to each of the farmers.

The “good enough” approach to GAP or GAP aligned sugar cane farming involves promoting feasible
upgrades and incremental improvements in agricultural practices that will result in the largest possible
increases in yields and profits.

3. Promotion of collective farming and marketing among ARBs

For small farmers/ARBs, the operating principle is not necessarily to be big, but to look and act big
through collective production and marketing, obtaining the efficiency and market access benefits of
size. In collective farming, multiple entities form a coalition or alliance to develop a "better" system
of production, which may reduce costs, improve quality, improve market access, help obtain scale
economies, share risk, obtain more information, or obtain better access to technology.

4. Assistance to small scale mills in upgrading technology and facilities

This may include the following: a) technical assistance to upgrade technology and production
systems; b) updating of business plans both to guide operations and to facilitate funding assistance
from social enterprise funding agencies/donor agencies; and c) linkages to financial institutions that
offer low interest loans.

5. Strengthen capacity of the Negros Muscovado Association to take the lead in the development of
the industry and in improving supply chain governance

The Negros Muscovado Association, under the leadership of Alter Trade and with organizational
development and technical support, can potentially take the lead in the following activities: a)
establishment of quality system infrastructure; b) collective/consolidated marketing; and c) conduct of
unified marketing campaign.

6. Conduct of a unified marketing campaign/collective marketing

The unified marketing campaign will involve the development and promotion of specific image and
set of product differentiation factors that the Negros muscovado industry as a whole can introduce and
sustain as a marketing proposal. Marketing support ranging from trade fair participation, selling

15
missions, brochures, packaging, etc. should be built around the agreed ‘image’ and product
differentiation factors.

7. Building capacity of mills to implement CSR

It is proposed that capacity building should integrate CSR concepts to promote sustainable creation of
value with triple bottom line dimensions: a) Profit, that will benefit all the players with a focus on
poor/sugar cane smallholders; b) Social, that will promote the inclusivity of the poor to improve living
conditions, and; c) Environment, that will facilitate the development and implementation of sound
strategies and actions towards the conservation of natural resources.

8. Incremental promotion of organic farming starting with gradual shift to organic fertilizer

This recommendation builds on the ongoing initiatives of Alter Trade to promote

ecological/sustainable farming. Activities may include: (a) Organic conversion strategic planning, (b)
Intensified promotion and awareness campaign on the benefits of organic sugar cane production
through demo farms, and (c) Support the establishment and/or strengthening of community-based
production units of organic fertilizer.

16
 SECTION 1:
NEGROS’S POSITION IN THE PHILIPPINE MUSCOVADO INDUSTRY

A. MUSCOVADO PRODUCTIO

In 2008, Region VI (Western Visayas) contributed 51.77% of the national volume of sugarcane
production. Of the 13,770,505 MT sugarcane production of the region, 88.28% came from Negros
Occidental. According to an SRA report released in 2006, there was only 2,071 hectares allotted for
muscovado production which is only a minuscule part of the 396,135 hectares planted to sugarcane.
Antique tops the muscovado producing provinces followed by Negros Occidental, and Sultan
Kudarat.

Muscovado was one of the most prominent export commodities of the Philippines, especially from the
Negros region from the 1800s until the late 1970s. Last year, it is estimated that Negros Occidental
produced around 2330 -2430 MT of muscovado. This comprised about 20% of the total Philippine
production. Bulk of Negros Oriental Production came from Alter Trade and Philippine-Hawaiian
Company. With two to three sugar mills diversifying to muscovado production, it is projected that
Negros Occidental would be the top muscovado producing province in the coming two to three years.

Negros Occidental is generally known for its high and export quality muscovado products. Brands
produced in Negros Occidental are among the more expensive muscovado products in the country.

B. I MAJOR MARKET SEGMETS

Based on the 1,735-ton national muscovado export in 2008, Negros Occidental accounted for 77% of
the Philippines export or about 1420 MT. It appears that Negros is geared towards the export market
with Alter Trade taking the lead.

2008 Sales Volume and Market Distribution

Processor 2008 Sales Volume (In Tons) Market Distribution (Tons)
Domestic Export
Alter Trade 1,500 160 1,340
Sagay Sugar Central 80 80
Philippine-Hawaiian Co. 600-700 600-700 minimal
LCARB MPC and TFM 90 90
Seed Trade 60 60
Total 2,330-1,430 910-1,010 1,420
% Distribution 100% 42% 58%
Source: Consolidated KII in Negros Occidental, October 2009

As per consolidated data from key informant interviews, about 58% of the 2008 production was
exported directly and indirectly by the millers. Almost all of the exports were made by Alter Trade.
The Philippine-Hawaiian Co. has indirectly shipped to other countries through an exporter but the
volume was still minimal and could not be accounted for with certainty.

The Sagay Sugar Cenrtral has exported around 80 tons this year to Japan but only had small
production last year – its maiden year of muscovado production.

17
 Alter Trade for its part has been exporting mainly through very specialized markets. In Europe, it taps
the fair trade and organic markets. In Japan and Korea, it enters through the people-to-people trade,
where the consumers and the producers regularly visit and understand each other’s concerns. For its
Malaysian market, it sells organic muscovado. In the US, it caters only to Filipino buyers so far.
Overall, around 89% of its production was exported and only about 11% was distributed locally.

Overseas, Alter Trade’s muscovado are used as an ingredient in making a body scrub in France and
chocolate in Switzerland.

2008 Muscovado Sales Volume and % Distribution of Alter Trade

Country Sales Volume (Tons) % Distribution
Germany 400 27%
Japan 300 20%
Switzerland 300 20%
Korea 160 11%
France 100 7%
Malaysia 36 2%
Austria 12 1%
US 10 1%
Domestic
Manila 100 7%
Locally within the region 60 4%
Total 1,478 100%
Source: Alter Trade Group, Nov. 2009

18
 SECTION 2:
CHARACTERISTICS OF THE MUSCOVADO VALUE CHAIN IN NEGROS

A. PRODUCTS

Muscovado is a type of unrefined sugar with a strong molasses flavor. It is also known as “Barbados
sugar" or "moist sugar". Since it does not undergo further purification or centrifugation just like the
normal brown sugar, it appears to be very dark brown, slightly coarser and stickier than normal brown
sugars. Unlike most brown sugars, which are made by adding molasses to refined white sugar,
muscovado takes its flavor and color from its source, sugarcane juice.

There are three primary product forms of muscovado: a) Amorphous – soft brown sugar powder; b)
Molded muscovado or rock sugar; and c) Thick concentrated syrup. The following are the three
classes of muscovado produced in the country: a) Class A – golden brown; b) Class B – brown; and c)
Class C – wood brown.

In Negros Occidental, muscovado can be found in three product formats: a) amorphous muscovado
sugar crystals b) muscovado rocks c) muscovado cookies. These products are sold in all major malls,
pasalubong and novelty centers within the province.

With the current hype for organic and health- conscious lifestyle, muscovado industry has been
revived. Reportedly, muscovado sugar has 187 grams of calcium, 58 grams of phosphorous, 4.8 grams
of iron, 757 grams of potassium and 97 grams of sodium, in which nutrient content is only
comparable to pure bees’ honey1. Likewise it is popularly recognized as natural and highly nutritive
because of its low calorie content as compared to other manufacture sugar and relatively a high priced
sweetener (white sugar)2

1
PCIERD, STII DOST. July 2008. Guide to Export Quality Muscovado Sugar Developed.
2 Magbanua Richard. October 2008. Muscovado De Antique: the Healthy Sweetener in the Market. HealthMad. www.healthmad.com

19
 B. PRODUCTIO TRED

1. Sugarcane

During the last 5 years (2004-2008),

2008), average sugarcane production of Negros Oriental was at 11.5
million MT. Within this 5-year
year period
period,, highest production was registered in 2008 with a volume of
12,156,699 MT, representing a 21% increase over 2007 figures.

2008 (in Metric Tons)

Sugarcane Production: 2004-2008
2004 2005 2006 2007 2008
Philippines 25,579,213.93 22,917,673.67 24,345,106 22,235,296.61 26,601,383.8
Region VI 13,714,826.79 13,072,225.84 13,416,415 11,494,674.87 13,770,504.8
Antique 61,128.98 60,744.19 57,562 56,354.9 54,458.5
Capiz 681,462.64 643,049.4 497,391 580,288.38 551,595.09
Iloilo 970949.17 880872.25 962740 803776.63 1007752.18
Negros Occidental 12,001,286 11,487,560 11,898,723 10,054,254.96 12,156,699
Source: Countrystat

2. Muscovado

There are 8 muscovado mills in Negros Occidental with a combined monthly production capacity of
499 MT per month. To date, only 5 of the 8 mills are operating with an aggregate capacity of 337 MT
per month. The JF Ledesma Foundation muscovado mill, which is being supported the Agencia
Española de Cooperación Internacional (AECI) via Fundacion CODESPA, is still on the set-up
set phase.
Construction of the mill of San Vicente ARB has temporarily been suspended pending release of grant
assistance from PDAP/CIDA.

20
 AME OF CAPACITY Projected VOLUME OF SUGAR
MILL/PROCESSOR I Monthly Volume CAE REQUIREMET
MUSCOVADO of Production
TOS/DAY
Operating
Stand-Alone/Exclusively Producing Muscovado
Alter Trade Manufacturing – 5-6 132 tons 11,888 tons at 90%
With 17 ARB/Pos as extraction rate
suppliers
Seed Trade 1 24 tons 1,560 tons at 65%
Sole Proprietor with 26 small extraction rate
farmers as suppliers
La Castellana ARB/TFM 1.3 31 tons 2,015 tons at 65%
ARB – 78 small farmer extraction rate
suppliers
Conventional Mill with Muscovado Processing
Sagay Sugar Central 4-5 108 tons 9,720 tons at 90%
Same group of suppliers for extraction rate
conventional sugar – 3,000
to 4000 farmers
Hawaiian Philippines Inc. 1.5 - 2 42 tons 2,730 tons at 65%
From own plantation – extraction rate
allocated 60 hectares
Total Operating 12.8 – 15.3 337 tons/month 28,250 tons/month
on Operating*
San Vicente 1 ARB MPC 1.5-3 54 tons 3,510 tons at 65%
Muscovado Plant extraction rate
Organic Producers in the 4 96 tons 8,640 tons at 90%
Island of Negros MPC extraction rate
JF Ledesma Foundation 0.5 12 tons 780 tons at 65% extraction
Target group – 500 farmers rate
formerly under Ledesma
Hacienda
Total on Operating 6-7.5 162 tons/month 12,930 tons/month
Total Potential Capacity 18.8-22.8 499 tons/month 41,180 tons/month
* Estimated capacity

C. VALUE CHAI PLAYERS

1. Input Suppliers

The main inputs needed in the production of sugar cane are the fertilizers and the sugar cane seedlings
or commonly called top cuts. It is a common practice among farmers that the seedlings are taken from
the previous plants and “left over” for replanting after the 3rd crop cycle. Plantations procure and use
new planting materials every cropping.

Fertilizer suppliers may be divided into 2, the commercial fertilizer suppliers and dealers and the
organic fertilizer producers. Commercial fertilizers are bought by the farmers through the retail

21
 agricultural supply shops or general merchandise shops for small volumes while large sugar cane
plantations purchase directly from fertilizer producer companies or main distributors.

In the case of Alter Trade, their sugar cane suppliers were trained to produce their own organic
fertilizers to support their protocols in organic farming system. However, in cases where these
supplier communities lack organic fertilizers, Alter Trade through its subsidiary, the Diversified
Organic Enterprise, Inc., can supply the gap.

Muscovado processing entails the use of several equipment. One of the most critical of which, if not
the most critical, is the cane crusher. The cane crusher initially determines how much sugar can be
derived from cane. The more efficient the cane crusher is, the more sugar can be produced. Equipment
used in muscovado processing particularly the cane crushers can be sourced from three main types of
suppliers: old cane crushers, locally fabricated crushers and those imported from India. Cane crushers
imported from India are said to be of good quality as well. However, there are constraints in costs. It
is said that these crushers cost around PhP1.5 million.

Old cane crushers can be purchased from backyard type sugarcane processors from Aklan and other
parts of Panay Island. Some of these cane crushers date back in the 1800s. There are muscovado
makers who believe that such cane crushers are better than the locally fabricated ones due to the more
durable steel composition of the former. Costs may range from PhP100,000 to PhP200,000 for a three
roller sugarcane crusher. Although there are still those selling these old crushers, supply is dwindling
nevertheless.
There are local fabricators which can replicate a typical crusher. These are usually based in Manila.
However, there is a fabricator based in Cagayan de Oro by the name of Asian Metals, which
fabricates the whole equipment used in muscovado processing. It is said that the cost would be around
PhP3 million and that these would already be BFAD standard.

2. Sugarcane Farmers

Sugar comprises 55 per cent of the land use in Negros Occidental, thus accounting for its largely
monocrop character. The island of Negros accounts for half of the country’s total production, and is
ideally suited for cane cultivation, as climatic factors such as regular monsoon rains and low typhoon
incidence complement its good soils.The harvest season commences from October to December
depending on whether the area is on the eastern or western seaboard, and ends more or less in May.

Currently, there are no farmers that can be exclusively referred to as “muscovado farmers”. The main
market of sugar cane farmers is still the conventional sugar mills/sugar centrals. Except for farmers
groups supported by Alter Trade, majority of the farmers deliver their produce to conventional sugar
central mills. Current absorption capacity of stand alone muscovado mills other than Alter Trade is
still low for these to be significant markets for farmers. Net income of farmers though is, more or less,
of same level whether they sell to muscovado mills or to the conventional sugar mills.

Below is the comparative advantage and disadvantage to supplying to stand alone/community-based

muscovado mills vis-à-vis conventional sugar mills.

ELEMETS Muscovado Milling Conventional Sugar Milling

Transportation and Hauling fee when transferring
Hauling transactions harvested cane to milling plant is
relatively lower and within the
ARBs’ sugarcane farms.
Cane Queuing Ratio Cane queuing seldom happens
since farmer to miller ratio is
Transportation cost from sugar
farm to sugar central is higher
especially when farms are beyond
the 50 km from the mill
Cane queuing takes longer time
especially during peak seasons as

22
 ELEMETS
Inspection of Can
quality
Length and complexity
of Production Process
Volume Requirement
Procurement and
Payment Process of
Sugar Cane
Source: SIMAG Foundation Study 2007 and SRA Appraisal Report 2006 Cited in PDAP Muscovado Prospects
Muscovado Milling
manageable
Cane quality is not as critical
compared with the standards set by
sugar mills.
For AlterTrade, they allow 3%
trash.
Its production process involves
evaporation only and basically a
non-centrifugal sugar made from
boiled sugar juice – availability of
market demand for muscovado
sugar.
Can absorb a few volume of sugar
cane such as 16Tons per day to 60
tons and this is distributed to only
a few ARB suppliers.
Lesser paper works for cane
farmers.
One time transaction – once
delivered, sorted and weighed,
payment is given or deducted from
the production loan.
Conventional Sugar Milling
planters compete for
prioritization. Delay on
processing entail reduction in
sugar recovery.
Good cane quality is always
required by the sugar mills in
order to produce more sugar as
defined in the standards provided.
Brown sugar uses at least 4
chemicals while white sugar
contains more than 20 chemicals
to come out with the final product
form.
Can take in higher volume of
sugarcane which can produce as
much as 750 tons sugar per day
However only enlisted members
and suppliers are allowed to
supply.
Too much paper work delay cane
liquidation and payment to sugar
cane farmer suppliers.
Other disadvantages:
• Big landowners are given
more priority in terms of
financial and technical
support
• Canes coming from big sugar
farms are given first priority
for milling
• 40% of sugar produced is
shared to the mill for milling
fees since milling operations
require big capital and are
labor intensive
• Truckers prefer to haul
sugarcanes from big sugar
farms.

Based on the estimated calculations of potential earnings of small farmer suppliers, their profit it is
relatively the same when supplying to either a muscovado mill or a conventional mill. Buying price of
muscovado millers (especially those not processing conventional sugar) range from PhP1,100 to
1,200 per ton cane regardless of the purity (Lkg/TC) while sugar centrals pay the total estimated PhP
1,196.85. The only advantage mentioned by the suppliers were the shorter payment terms for

23
 muscovado millers that pay less than 1 week while sugar centrals pay after a few weeks from
delivery. All harvesting and transport costs are borne by the muscovado millers which is not the case
when milling in the sugar centrals.

For conventional sugar mills that are also engaged in muscovado processing, the same procurement
practices apply for all canes whether these would be used for conventional or muscovado sugar.

Estimated revenue earned by a farmer when milling in the sugar central

o. of Units Unit Unit Price Amount
Gross revenue
Sugar 1.7 Lkg 1,200 2,040.00
Molasses 0.033 Ton 6,000 198.35
Total 2,238.35
Farmers share (70%) 1,566.85

Less: Harvest and Transport Costs

Harvesting Cost 1 Ton 120.00 120.00
Hauling Cost (Karo) 1 Ton 50.00 50.00
Trucking Cost 1 Ton 200.00 200.00
370.00

Revenue Less Harvest and Trucking Costs 1,196.85

2007 statistics from SRA indicate that there are about 11,926 farms which are tilled by 13,742
farmers. Of the 13,742 farmers, 57% have farm sizes of less than 5 hectares. As of 2006, 5,191.72
hectares have been distributed to 4,459 agrarian reform beneficiaries (ARBs). Average farm size per
beneficiary is about 1.16 hectares. CARP’s implementation under the current modalities in sugarcane
plantation areas is considered to be the most problematic in terms of land distribution. Opponents of
the extension of Comprehensive Agrarian Reform Program (CARP) point to disadvantages of small
scale farming, in terms of forfeited scale economies, higher coordination cost, and unstable supplies
due to the preference for diversifying away from sugarcane by land reform beneficiaries once land is
redistributed. On the other hand, this opposition may be viewed as motivated by preservation of
industry rent.

DAR’s approach of focusing on the transfer of land but without putting into place the social
infrastructure and support services proved to be counterproductive especially in sugarcane areas. land
acquisition and distribution by itself does not free poor farmers from the bondage of poverty nor does
it lead to production increases, especially in sugarcane farms.

Farm Range (in hectares) o. of Farms

2002/03 2003/04 2004/05 2005/06 2006/07
Less than 5 5,403 6,744 8,787 8,496 6,838
5.01 - 10.00 1,688 1,721 1,820 1,801 1,816
10.01 - 25.00 1,507 1,441 1,560 1,554 1,535
25.01 - 50.00 870 910 931 935 935
50.01 - 100.00 572 555 559 555 552
100.01 - up 501 257 253 246 250
Total 10,541 11,628 13,910 13,587 11,926
Source: SRA Region VI

24
 o. of Planters
Farm Range (in hectares) 2002/03 2003/04 2004/05 2005/06 2006/07
Less than 5 5,320 6,649 8,549 8,371 8,959
5.01 - 10.00 1,658 1,660 1,763 1,758 1,764
10.01 - 25.00 1,425 1,349 1,438 1,432 1,409
25.01 - 50.00 823 825 859 856 856
50.01 - 100.00 542 525 529 518 516
100.01 - up 248 240 239 236 238
Total 10,016 11,248 13,377 13,171 13,742
Source: SRA Region VI

Small sugar planters have limited capacity to implement recommended production techniques. Their
yield ranges from 40 to 60 tons sugarcane per hectare. It was cited in the Evaluation study of the
CARP Implementation in Negros Occidental conducted by the provincial government that ARBs
have either mortgaged, leased, or placed their awarded lots under a financing scheme which is
usually to the former landowner due to the following: a) Sugarcane farming is capital intensive and
ARBs do not have access to financial resources; b) the cropping period is long and ARBs do not have
other sources of income; and c) it operates on the economies of scale. This set-up has perpetuated the
tenancy relationship, the eradication of which was the original purpose of land reform.

Others who are under the assistance or are partners of the muscovado millers (e.g., partner
communities of the Alter Trade Manufacturing Inc. and the Task Force Mapalad) are the main
suppliers of such mills. However, in instances where the mills are out of service or are in full capacity,
the partner suppliers may opt to mill in conventional sugar centrals.

Alter Trade has about 17 people’s organization (POs) under its assistance. These are agrarian reform
beneficiaries located in the municipalities of La Castellana and Murcia and in the cities of Talisay,
Bago and La Carlota. They comprise 879 individual members who own 812 hectares. In order to
assist these POs better, Alter Trade has assigned an agriculturist, an organizer and a credit staff to
each PO. Through them, services can be easily translated to the communities. Alter Trade schedules
each PO’s activities from planting to harvesting. Before planting, the POs are required to submit their
budget so as to avail of the credit assistance. They are also required to maintain and submit financial,
production and management records so as to monitor the activities. The price of sugarcane is fixed
throughout the year and is on a per ton cane basis. Payments are made after milling with all the
expenses deducted.

For TFM/LCARB MPC, the sugar cane suppliers are the members of the LCARB and other
neighbouring farmers. Since the plant does not have a large weighing scale, canes are weighed first in
the transloading stations of the sugar centrals for a fee. Payments are then made after delivery of the
cane and are on per ton cane basis.

Land Distribution under the Comprehensive Agrarian Reform Program (CARP)

egros Occidental CY 2006
City/Municipality Area (in Hectares) o. of Farmer Beneficiaries
Bago City 261.7283 279
Cadiz City 388.6061 331
Escalante City 385.2407 229
Himamaylan City 204.4396 203
Kabankalan City 365.4453 266

25
Land Distribution under the Comprehensive Agrarian Reform Program (CARP)
egros Occidental CY 2006
City/Municipality Area (in Hectares) o. of Farmer Beneficiaries
La Carlota City 15.0404 9
Sagay City 121.5910 109
San Carlos City 262.2437 162
Silay City 137.8086 100
Sipalay City 49.0922 21
Talisay City 101.3219 88
Victorias City 242.7410 161
Binalbagan 118.4314 56
Calatrava 211.5505 155
Candoni 39.1869 17
Cauayan 233.8638 168
E.B. Magalona 325.5427 378
Hinigaran 20.9199 15
Hinoba-an 72.3465 56
Ilog 134.7473 104
Isabela 440.3769 662
La Castellana 180.7144 250
Manapla 46.3489 43
Moises Padilla 68.2541 102
Murcia 240.7035 163
Pontevedra 241.7086 185
Pulupandan 1.3437 2
S. Benedicto 59.8940 25
San Enrique 15.1397 12
Toboso 195.2465 102
Valladolid 9.6552 6
Total 5.191.2733 4,459
Source: DAR Bacolod

Medium and large sugar cane planters have the capacity to utilize all necessary input materials,
irrigation and production technologies. Average yield of plantations is about 80-100 tons sugarcane
per hectare. It is a usual practice in Negros that large planters can become a member with different
Sugar Centrals and thus able to supply to different sugar mills. This method maximizes their full
production. include hacienda farms with at least 20 hectares and above. Generally, big planters
deliver their produce to the conventional sugar central mills. They

Farm workers in haciendas are divided into two categories:

- Permanent farm workers (Dumaan): work in the haciendas whole-year round, albeit for 2 to 3
days a week only
- Migrant workers (sacadas): work during the milling season only when there is a need to
harvest the sugarcane faster for milling.

Much of the work in the haciendas are done during the milling season (October-May), where much of
the work involved is the cutting and loading of sugarcane. Land preparation, planting and weeding are
also done during these months. The months of June to September is considered by the sugar workers

26
as the "tiempos muertos" or "dead season" where only about 10% of the workforce during milling is
able to engage in farm work in the haciendas.

3. Muscovado Millers/Processors

There are 5 operational muscovado mills in Negros Occidental: Alter Trade Manufacturing Inc.
(affiliate of the Alter Trade Group), Sagay Sugar Central, Philippine-Hawaiian Co., La Castellana
ARB MPC and Task Force Mapalad and Seed Trade. Of these 5 operational mills, three are stand-
alone muscovado mills while the two other mills are conventional sugar mills that have expanded into
muscovado production. There are also 4 mills that are being set up but not yet operational as of
October 2009.

a. Operating Mills

Alter Trade

Alter Trade Foundation Inc. was established and registered in June 30, 1987 to assist agrarian reform
beneficiaries and other marginal farmers in need of production capital, technology and market access
for their goods. It aims: (1) to promote sustainable agriculture among farmers and other organized
groups through organic farming; (2) to provide technology for productive and sustainable use of the
land by organized farmers and small farming households; (3) to extend soft-term financial assistance
to marginal farmers; and (4) to solicit grants and donations from institutions both local and abroad for
its funded programs.

The 17 peoples organizations/ARBs supported and trained by Altertrade on sustainable agriculture /

organic farming system and Fair Trade comprise its supply base of sugar cane for muscovado
processing. Altertrade is considered the leading producer of muscovado in the country.

Muscovado was first exported by Alter Trade Manufacturing to Japan in 1987. It has since expanded
to several markets in Europe and Asia through the principles of Fair Trade and the Sustainable
Agriculture – Organic Agriculture. As such, it has acquired fair trade and organic certifications
internationally. Out of the 1500 tons produced and sold in 2008, it was able to export 89% while 165
tons was sold locally or in the Domestic market. Main export destinations of Altertrade are: Europe –
Germany, France, Austria and Switzerland, United States and Asian Countries – Japan, Malaysia and
Korea.

Sagay Sugar Central

This conventional sugar mill produces around 3 million bags of 50kg sugar annually. Most of these
are for domestic market, while some are for the US market. In 2008, it started to produce muscovado
to cushion potential negative impact of the ASEAN zero-tariff regime for several products including
sugar which will take effect on January 2010. The Mill aims to mitigate the possible drop in
conventional sugar prices by producing more of the high valued muscovado sugar. Currently, it only
produces muscovado if the price of class D sugar is less attractive. Suppliers of sugar cane come from
its member planters (3000-4000 farmers) mostly small farmers. Their main buyer is a trader and at the
same time member of Sagay Sugar Central that ships the bulk products to Japan where they are
repacked and sold in retail packs.

Philippine-Hawaiian Co.

It is a large sugar miller based in Silay City with a capacity of 15,000 – 19,000 50kg bags per day.
Hawaiian’s recovery of 2.12 LKg/TC for conventional sugar is the highest all over the country.
Central Azucarera Don Pedro (CADP), the biggest raw sugar producer and the second biggest sugar
refiner in the Philippines, has a 45 percent share in the Philippine Hawaiian Company. CADP of the
Roxas Holding is also setting-up a bio-ethanol plant.

27
To fully optimize the use of its existing infrastructure, the company diversified into muscovado
processing sometime in 2005. It initially produced muscovado only for showcasing. However, since
yearly sales growth has doubled or even tripled, management has decided to invest more on the
improvement and marketing of its muscovado. It has a capacity of 1.5 to 2 tons muscovado per day.

Hawaiian muscovado products are among the top preferred brands by leading supermarkets and
distributors. As with its refined sugar, the company works with distributors rather than selling directly
to supermarkets and institutional buyers. The products are currently sold in supermarkets in Manila
such as SM and Landmark. About 10% of its production is sold within Negros.

La Castellana ARB MPC and Task Force

Mapalad

LCARB MPC, which was organized in 2005,

has 141 members of agrarian reform
beneficiaries. It is being assisted and supported
by TFM. The muscovado mill project is under a
build-operate-transfer scheme, that was entered
into by the cooperative and TFM. The plant is
co-managed by TFM and LCARB. It is also
expected that TFM pay for the rental of the land
where the plant is built on. The plant also serves
as an alternate destination for LCARB’s
sugarcane.

Currently, the operations are intermittent due to lack of supply of sugarcane and the needed repairs on
the plant. Main market for its products is UMFI of Manila and the neighborhood stores. The
cooperative delivers Class A muscovado to UMFI at Php 40.00/kg and sells the second class sugar
(rocks) to local traders who buys it at the same price and sells it in the town market at PhP 45.00/kg.
TFM however are looking for alternative channels and had some initial talks with a Chinese buyer
operating in Cebu. It has a capacity of about 1.3 tons muscovado per day.

Seed Trade Inc.

This company is privately owned by a former affiliate of Alter Trade and registered under a single
proprietorship business permit. It started producing muscovado in 1989 under a home-based facility
which has a capacity of about 1 ton muscovado per day. Thru years of experience, it was able to
design and utilize a mobile sugar cane crusher which can be brought from farm to farm, while the
extracted juice can be transported to the plant for further processing. Currently, the plant operates
intermittently due to lack of supply of sugarcane and working capital. Seed Trade currently sells
locally to retail shops such as to the MUAD-assisted FARM Inc. Marketing center and café shops in
Bacolod. The owner has been tapped by PDAP to provide technical assistance to CIDA funded
muscovado processing facility of the San Vicente 1 ARB MPC.

b. Non-Operating Mills

San Vicente 1 ARB MPC Muscovado Plant

This ARB is a PDAP-assisted muscovado processing

plant. For the construction of the plant, PDAP has
released about PhP2 million as loan to the
cooperative funded by CIDA through PDAP and
accessed through FSDC. The Processing Plant is still
not operational due to funding problems; which still

28
needs about PhP800,000 to finish plant construction and operate. The proposal to construct was
submitted in 2006, but the funding was released only in 2008. The price of materials for construction
has since increased. Loan payment is said to start upon the onset of the processing. Originally, the
cooperative was assisted by MUAD for the development of the muscovado plant. This responsibility
was since transferred to SIMAG. Currently, there is confusion as to the extent of assistance to be
provided by SIMAG. Once operational, the mill is said to have an estimated capacity of 1.5-3 tons
muscovado per day.

Organic Producers in the Island of Negros MPC (OPTION)

• Still not producing commercially

• Uses the reverse process in producing muscovado – from raw sugar to muscovado by adding
molasses
• It is said that the lower class of raw sugar is used as the primary raw material

JF Ledesma Foundation

The Foundation is said to operate a 0.5 ton muscovado capacity in February of 2010. The set up of the
processing plant is supported by Fundacion Codespa and funded by AECID. The processing plant will
service and secure supply from 500 small farmers formerly belonging to the Ledesma hacienda.

4. Traders/Distributors

a. Manila Based Distributors

Upland Marketing Foundation Inc. (UMFI)

UMFI started its operation as a marketing arm-distributor of processed

food products from community-based enterprises. It aims to provide the
appropriate mechanism that can directly support communities’ efforts to
establish livelihood projects that are in line with sustainable resource
use. Presently, it has around 200 retail outlets that include all the major
supermarket chains in Metro Manila such as SM, Rustans, Robinsons,
Ever Supermarkets and Seven Eleven Convenience Store. Distribution
activities have also expanded to include Northern Luzon, Southern
Tagalog and Visayas. UMFI distributes muscovado and 11 other
products from communities to mainstream markets in Metro Manila.
There are also more than 30 other CBEs serving the seasonal markets of
UMFI. As per interview, UMFI requires 3 tons of muscovado per
month.

Sharmila Inc.

Sharmila Inc. is a Manila based distributor of marine products,

seafood products, herbal food supplement and muscovado. The
company started in 1970's with bottled fish as their first product
entry. It sources its muscovado from Alter Trade and Philippine-
Hawaiian Co. at a volume of 36 tons per month. It then repacks
and displays the sugar in retail outlets such as the major
supermarkets in Metro Manila under the brands Marisco and Alter
Trade. Based on an interview with their Administrative Officer,
they also export monthly to the Europe, US and Guam depending
on the purchase order. They also repack the muscovado into 5cm x
5 cm (1 tsp.) sachet and supply these to coffee shops and
restaurants.

29
.
Peotraco Industries Inc.

Peotraco Industries Inc. started iin

n 1924 as People's Trading Company. It was involved in trading
sugar, copra and other commodities. The company later ventured into the manufacture of
confectioner's sugar and recently, muscovado.

According to their Purchasing Officer, Ms. Virgie, it sou

sources
rces muscovado from Negros (Hawaiian) and
Bais. Negros price is 10% higher than Bais. Last month, 400 bags were supplied by Negros (200bags
@ 40 kilos and 200 bags @ 50 kilos. They repack it at 250g and 500 g and distribute mainly to malls
(80%) and bakeries.
es. There’s a 20% increase in price of muscovado purchase from last year. There are
inquiries for organic muscovado from their contacts abroad. Peotraco Industries Inc. passed the TUV
Product Service and is ISO 9002 certified since December 2000 and ISO 90 9001:2000
01:2000 certified last
December 2003.

TFN Far East, Inc. (Makati City)

TFN Far East is a trading company based in Makati, Metro Manila. According to Ms. Rose Roque,
the Administrative Officer, they stopped purchasing muscovado from Negros (they did not disclose
the main source) only this year.

b. Foreign Buyers

rocessors, Alter Trade, Sagay Sugar Central and Phil.

Of the 5 processors, Phil.-Hawaiian
Hawaiian Co. are currently exporting
directly to foreign buyers and/or indirectly thru local exporters. Through the fair trade market, Alter
Trade has buyers from Germany, Switzerland, France and Austri Austria.
a. It exports to Japan and Korea
through the people-to-people
people trade. It also exports to Malaysia through the organic market. For its US
shipments, Filipino traders are the main buyers. The Sagay Sugar Central has Japanese buyers who
repackage it under the local Japanese brand.

The buyer of AlterTrade in France, Alter Eco distributes their muscovado to cosmetics/
pharmaceutical companies that produce natural/organic body scrub. It is said that muscovado adds
moisture to the body scrub while providing exfol
exfoliating
iating properties. In Switzerland, in addition to
retailing in specialty/organic shops, muscovado are utilized as an ingredient in fair trade and organic
chocolates.

Various muscovado products and

packaging formats from Alter Trade
sold in the export market.

30
NEGROS MUSCOVADO VALUE CHAIN MAP SCHEMATIC DIAGRAM
VALUE CHAI ACTORS
CONSUMPTION Fair Trade Chocolate Fair Trade / People to Filipino and Asian Local Filipino consumers
Cosmetics and
Pharma Processors People Trade consumers consumers in the US

Asian Organic and EU Fair Trade and US based Manila Manila Food Negros Negros
natural food shops Specialty Shops Asian Food Supermarket Establishments Coffee Shops Grocery stores
RETAILING

International Trading: Sharmila Inc.

DISTRIBUTION AND Individual trader Hawaiian PEOTRACO UMFI Mnla Local Seed Trade
EU – Germany, Swiss, Manila
TRADING Cortez Philippines Inc. V: 18T/mo V: 2T/mo traders
Austria, France V: 36T/mo V:1 ton /
Php68/kg Php 45/kg
Asia – Japan, Korea Retail Pack: US, day
and Malaysia; US V: 1.5-2 Php:45/kilo
tons/day

AlterTrade Manufacturing Inc. Php: 39.50/kg La Castellana

Sagay Sugar Cen.
TFM
V: 4-5 tons/day V: 1.4
MUSCOVADO V:5-6 tons/day certified organic and Fair Area: 60 ha
PROCESSING Trade; Php:41/kilo tons/day
Php: 40/kilo
# Employees: ♀ : 28 (38%)
♂11 (100%) ♂: 46
LaCastellana LaCastellana
SUGAR CANE LaCarlota
Area: 62ha
Sagay Member Murcia Bago Talisay LaCastell ♀0% ♂# 4 – small ♂ #: 26
PRODUCTION Growers 3,000 to
Php: 1100/TC
scale cuttings Area: 75 has
4,000; Php: 1150/TC # 879 growers (♀45%), Area: 812 ha , Php:1250- 1400/TC PhP: 1100/TC Php: 1100/TC

INPUT SUPPLIERS Commercial Fertilizer Equipment 17 POs ARBs Producing Organic Commercial Fertilizer Suppliers / Equipment
Suppliers Suppliers fertilizers; General Agricultural Supply Suppliers
stores

31
 CONSUMPTION

BFAD International Cert.

LTO Bodies
SRA
(USDA NOP, EEC
EXPORT
2092/91, Bio
DOCUME
BFAD Suisse, Naturland)
NTATION
Export
Cert
RETAILING
LGUs –
Business DTI
Permits and Market linkage
health cert. Promotion thru trade
fairs
TRADERS

DOST ITDI Food FACILITATORS

Processing Division
PDAP
- GMP for micros, based TFM
MUSCOVADO on availability and MUAD
PROCESSING request only
SEED TRADE
ALTER TRADE
FOUND.
SIMAG
SUGAR CANE Sugar Regulatory Agency
PRODUCTION (SRA) SIMAG FOUNDATION
– FERTILIZER LOAN
Annual Training on sugar ALTER TRADE
Cane Production FOUNDATION
INPUT SUPPLIERS -Production Loan

Legend: CAPACITY SUPPORTERS FACILITATORS OPERATORS

INFLUENCERS
BUILDERS

32
 D. FIRM LEVEL UPGRADIG

1. Sugar Cane Farming

Although there was a 37% overall increase in farmers with a 68% increase in smallholders (less than 5
hectares), average farm size of smallholders decreased from 3.16 hectares in 2002 to 2.09 hectares in
2007. As per studies conducted, a sugarcane farm requires at least 5 hectares to be competitive in the
global economic environment. Small farms appeared to be economically inefficient compared to the
large ones while medium and large farms appeared to be equally economically efficient. Analysis of
input use differences among farm size class shows that the higher input usage by the large farms tends
to increase the quantity produced and with the low price of inputs, generates a larger profit per
hectare. The higher input prices faced by the small farmers tends to reduce the amount of input used
thus giving a lower profit. Thus, part of the allocative efficiency differences between the farm size
groups may be attributed to the differences in the input price, resulting from market power. This
implies the need for farmers to work collectively from input procurement to marketing to achieve
economies of scale.

Total Area
Farm Range (in hectares) 2002/03 2003/04 2004/05 2005/06 2006/07
Less than 5 16,801.72 19,212.07 17,512.53 17,991.08 18,714.17
5.01 - 10.00 13,368.65 12,708.10 13,122.46 13,430.11 10,979.10
10.01 - 25.00 26,073.04 24,574.72 26,563.04 26,322.28 25,787.36
25.01 - 50.00 30,459.57 32,465.76 32,725.83 32,713.03 32,761.25
50.01 - 100.00 36,620.81 37,501.32 37,277.64 36,752.94 36,795.16
100.01 - up 35,966.80 37,061.16 30,125.44 37,097.87 37,553.36
Total 159,290.59 163,523.13 157,326.94 164,307.31 162,590.40
Source: SRA Bacolod

Average Farm Size

Farm Range (in hectares) 2002/03 2003/04 2004/05 2005/06 2006/07
Less than 5 3.16 2.89 2.05 2.15 2.09
5.01 - 10.00 8.06 7.66 7.44 7.64 6.22
10.01 - 25.00 18.30 18.22 18.47 18.38 18.30
25.01 - 50.00 37.01 39.35 38.10 38.22 38.27
50.01 - 100.00 67.57 71.43 70.47 70.95 71.31
100.01 - up 145.03 154.42 126.05 157.19 157.79
Source: SRA Bacolod

Sugar cane can either be an annual or semi-perennial crop. Its output depends on the daily and
monthly maintenance operations on the farm, starting from land preparation up to harvesting and
ratooning (second and subsequent years production). The cultivation of sugar cane involves around 21
farm operations and approximately 6 farm inputs. The study entitled “ Determinants of sugar can
yield in agrarian reform communities in Negros Occidental” (De los Santos/Mendoza) indicated that
the seven variables found to significantly affect sugarcane yields were the amount of nitrogen applied,
irrigation, row spacing, practice of chopping cane stalks, number of ratoons, beneficiary's age, and
farm size.

Due to financial limitations, ARBs apply inadequate amount of fertilizer and adopt suboptimal land
preparation practices, narrow furrow spacing, and improper harvesting and hauling of canes. The
ARBs chop sugarcane stalks to increase the hauling capacity of their trucks. Financial constraints also

33
 force them to increase the number of ratoon crops as a cost-saving measure. Land preparation and
cultivation are carried out by person-animal power and or by person-machine combinations. It is
estimated that 1 hour of animal work is equal to 0.13587 hours of machine work. Likewise, ox-drawn
plows cannot create furrows deep enough for the cane's optimum growth. Sugar cane roots must reach
one meter (1m) deep for higher yields and more efficient harvesting. However, small farmers
generally cannot afford to buy a tractor and the small sizes of their farm do not warrant individual
investment on mechanization. Small farmers usually hire tractors and since the scope of work is on a
per hectare basis, the cost is high, whereas those large farms with tractors can maximize their use
although they pay more overheads, fuels, repair and depreciation costs. A large hectareage can
produce sufficient cane tops and planting material, thus, minimizing the cost of seeds. The small
farmers have to buy seeds from neighboring farms. Similarly, while medium and large plantations
have access to drip irrigation, small farmers rely on rainfall for its water requirements.

Small planters produce only 40 to 60 tons sugarcane per hectare. This is very low when compared to
the yields of medium and large farms which range from 80 to 100 MT per hectare or to potential cane
yields (120 to 150 tons/ha) achieved in Brazil, India, South Africa and other regions growing
sugarcane with drip irrigation and fertigation. Therefore, new and innovative sustainable technologies
are needed to raise and sustain sugarcane productivity per hectare. Fertilizer inputs into sugarcane, for
instance, are a significant cost of production. Determining the correct blend to use, determining its
cost per hectare and comparing to other blends/suppliers is very important for growers. When
determining the best blend to use the first and most accurate way is to have soil test taken from the
block and for it to be interpreted by a reputable advisor. A soil test will provide accurate
recommendations on the rates of nutrients required and a recommended blend or prescription blend to
meet this soil and crop needs. Unfortunately, though, technology access/transfer among small farmers
is dependent on cut and load) government extension services and peer-to-peer learning. Cut and load
(Tapas-karga) and other sugar production-related skills are the only skills most Agrarian Reform
Beneficiaries in the sugar plantation possess. The application of technology and management on the
farm are entirely new fields to them.

The table below summarizes the differences in knowledge and technology of the 2 levels of farmers in
the province.

Farm Size Knowledge and Technology Analysis of Effect of

Differences
Medium/Large • Application of recommended rate of • Small planters produce only
Planters fertilization 40 to 60 tons sugarcane per
• With irrigation hectare, while big planters
• Trained agriculture technicians – have yields of 80 to 100 tons
attends SRA trainings and has per hectare
extensive experiences • Production cost of big
• New planting materials every planters is about PhP50,000
cropping per hectare. Production cost of
Small Planters – small planters is about
• Minimum fertilization
conventional farming PhP25,000 to 30,000 per
• Rainfed
hectare.
• New planting materials every 3
• Small organic farmers have an
cropping
average cost of PhP 45,000
• Usually agrarian reform beneficiaries per hectare with yields of 57
Small Planters/POs • Utilization of Organic fertilizer at tons per hectare.
of Altertrade – recommended rate of application
organic farming • New planting materials every 3
system cropping
• Usually agrarian reform beneficiaries

34
 A major criticism of the agrarian reform program is the lack of support services to the ARBs. The
recent study conducted by the provincial government of Negros Occidental revealed that 97 percent of
the approximately 100,000 beneficiaries (all crops) in the province claimed they have not received
any support services from the government. Furthermore, 80 percent also said they have not increased
their productivity due to lack of support services, while 70 percent believe they have not obtained any
economic gain from CARP. Another group of beneficiaries in Northern Negros claimed they are not
economically better off now that they have their awarded lands than when they were still employees
of their former landowner 20 years ago. In many cases, awardees have leased back their lands to
former landowners. Anecdotal stories also indicated that farm sizes of smallholders are continuously
decreasing since they pawn of sell parts of their land to cover production costs or emergency needs
(e.g., when family member is sick, tuition, etc.). This also implies the lack of safety nets.

The lack of adequate accomplishment of the CARP program in sugarcane industry may in fact have a
technical and economic policy origin. The World Bank (2009) study finds that sugarcane farming
differs markedly from the farming of other major crops under tenanted cultivation. Specifically:

• Significant impediments to competition due to regulation are in place, and more are
forthcoming owing to the biofuel mandate.
• There are moderate scale economies in sugarcane farming
• Small scale farming is associated with higher coordination cost

Cost and Return Analysis

Based on the costs and returns of the various cultivation strategies employed in Negros Occidental, it
appears that the intensive farming operation has the highest net income but has the lowest return on
cost at 87%. Organic farming has the second highest net income as well as return on cost at about
94%. The low intensity cultivation used by small planters has the least net income but has the highest
return on cost at more than 100%.

Below are the cost and return analysis based on Altertrade’s experiences:

Cost and Return: Intensive Farming

Gross Income 99,733.00
Ave. yield per hectare (tons) 80.00
Ave. L-kg/TC 1.50
Price per L-kg 1,100.00
Net planter share on yield per hectare at 67% (No. of bags) 80.00

Cost of production per hectare 52,858.22

Land clearing 1,080.00

Land preparation
Plowing (1 pass) 2,500.00
Disch harrowing (2 passes) 2,500.00
Furrowing 1,350.00 6,350.00
Canepoint preparation and plantings
Canepoint preparation at P305.79/lacsa x 4 lacsa/ha 1,223.16
Hauling in field at P100/lacsa x 4 lacsa 400.00
Planting at P305.79/lacsa at 4 lacsa 1,223.16
Cost of canepoint at P1,800/lacsa x 4 lacsa 7,200.00

35
Cost and Return: Intensive Farming
Hauling cost of canepont at P300/lacsa x 4 lacsa) 1,200.00
Unloading cost of at P70/lacsa x 4 lacsa 280.00 11,526.32
Fertilization
5 bags 18-46-0 at P1400/bag 7,000.00
6 bags urea at P1040/bag 6,240.00
6 bags 0-0-60 at P800 4,800.00
Hauling cost of 17 bags at P15/loading-unloading 255.00
Transport cost at P30.00/bag 510.00
Cost of application at P60/bag 1,020.00 19,825.00
Weeding and cultivation
Chemical
1 pack KARNEX 1,720.00
1 galoon 24D 1,500.00
1 liter stiker 150.00
Labor cost of 8 man days at P180/MD 1,440.00 4,810.00
Cultivation
On barring 3 x 2 passes at P176/pass 1,056.00
Offf barring 3 x 2 passes at P176/pass 1,056.00
Ridge basting 2 x 3 passes at P176/pass 1,056.00
Final hilling up 2 x 3 passes at P176/pass 1,056.00 4,224.00
Weeding 3 x P850/ha 2,550.00
Replanting
1/2 lacsa at P305.79/lacsa 152.90
Cost of planting material 900.00 1,052.90
Drainage 8 MD at P180/day 1,440.00

et Income 46,875.00

Cost and Return: Small Farmers

Gross Income 66,000.00
Ave. yield per hectare (tons) 60.00
Ave. L-kg/TC 1.50
Price per L-kg 1,100.00
Net planter share on yield per hectare at 67% (No. of bags) 60.00

Cost of production per hectare 31,490.00

Land clearing 1,080.00

Land preparation
Plowing (1 pass) 2,500.00
Disch harrowing (2 passes) 2,500.00
Furrowing 1,350.00 6,350.00
Canepoint preparation and plantings
Canepoint preparation at P305.79/lacsa x 4 lacsa/ha 1,223.16
Hauling in field at P100/lacsa x 4 lacsa 400.00
Planting at P305.79/lacsa at 4 lacsa 1,223.16
Cost of canepoint at P1,800/lacsa x 4 lacsa 7,200.00

36
Cost and Return: Small Farmers
Hauling cost of canepont at P300/lacsa x 4 lacsa) 1,200.00
Unloading cost of at P70/lacsa x 4 lacsa 280.00 11,526.32
Fertilization
6 bags urea 3,120.00
3 bags 0-0-60 2,400.00
Cost of application at P60/bag 240.00 5,760.00
Weeding and cultivation
Cultivation
On barring 3 x 2 passes at P176/pass 1,056.00
Off barring 3 x 2 passes at P176/pass 1,056.00
Ridge basting 2 x 3 passes at P176/pass 1,056.00
Final hilling up 2 x 3 passes at P176/pass 1,056.00 4,224.00
Weeding 3 x P850/ha 2,550.00

et Income 34,510.00

Organic Sugarcane Production Cost per Hectare

Rate/Ha.
Soil Analysis 150.00
Land preparation 8,000.00
Liming
Agricultural lime and transportation 3t/ha 1,500.00
Lime application 300.00
Planting material
Canepoints 4L/ha 4,000.00
Transportation of canepoints 600.00
Infield hauling and detrashing of canepoints/ selection 200.00
Planting of canepoints 800.00
Fertilization
Fertilizers 150 bag/ha 19,500.00
Transportation, load and loading of fertilizers 1,350.00
Infield hauling and mixing of fertilizers 300.00
Direct application 500.00
Cultivation (carabao)
1st ridge busting 1 pass 180.00
2nd off barring 2 pass 360.00
3rd on barring 3 pass 540.00
4th hilling-up 3 pass 540.00
Weeding
1st weeding 900.00
2nd weeding 1,000.00
3rd weeding 1,000.00
Drainage canal construction 500.00
Side clearing 300.00
Irrigation 1,000.00
Administration cost 1,500.00
Total 45,020.00

37
Organic Sugarcane Production Cost per Hectare
Gross Income
Ave. yield per hectare (tons) 57.00
Ave. L-kg/TC 1.7
Price per L-kg 1,350
Gross income 87,210.00

et Income 42,190.00

2. Muscovado Processing

Postharvest

High quality cane has a good juice content with high sugar levels. Altertrade, for example, conducts
premilling tests in the fields and minimum Poor quality cane or cane that has been harvested early
may have similar juice content but the sugar levels will be reduced. Harvesting techniques employed
affects the sugar content in cane. The practice of burning cane before harvesting, as well as the
amount of impurities attached to the cane, e.g., soil, affects sugar recovery. Cane should be milled
within twenty-four (24) hours from cutting to maintain high sugar content. It is, therefore, important
that suppliers are contracted to supply cane at given times. This enables the plant to work continually
while minimizing the time harvested cane is allowed to stand.

Milling

While Negros muscovado products are recognized to be of better quality compared to those produced
in other regions, the production cost especially among small stand-alone mills is relatively high
compared to other areas and to the conventional sugar cum muscovado mills. Factors that contribute
to high production costs are low extraction efficiency, high cost of fuel, and labor costs.

The efficiency with which juice can be extracted from the cane is limited by the technology used.
While the upgraded sugar mills can extract between 95 and 98% of the cane juice, the old fashioned
sugar mills (one tandem) only extracts 60% to 65% of the cane juice. Alter Trade has a three tandems
dry crushing and is able to extract 80% to 85% of the cane juice. Yields can also be improved by
careful control of the boiling process. Boiling should be completed as rapidly as possible and the
conditions kept as clean as possible.

Muscovado production uses a great deal of energy to boil the juice as well as that required to operate
crushers and other equipment. In most cases, sugar factories rely on bagasse as the main fuel for the
boiling process and care is required, especially with open pan systems, to ensure that sufficient
bagasse is available. Companies like Hawaiian Philippines which has a large capacity are able to set-
up their whole plant using bagasse as the main source of energy. With careful management and using
modern, highly efficient bagasse-fired boilers, large companies are able to produce more electricity
than is required by the factory.

Upgrading from direct heating to use of steam will also improve efficiency and reduce costs. Below is
the comparison on efficiency between direct heating vis-à-vis steam.

Direct Heating/Firing: Old Technology Steam: ew Technology

Hard to control temperature Temperature can be controlled
Bagasse or bamboo as fuel Efficiency of fuel
Needs 15 cubic feet bamboo per 30 ton cane Needs 10 cubic feet bamboo per 60 ton cane

38
 Below is a summary of the differences and 2 types of muscovado milling and processing plant in
Negros Occidental, namely: a) open pan direct to the furnace – small scale/conventional process; and
b) Using steam jacketed kettles – large scale/upgraded.
OPE PA DIRECT TO THE FURACE
Small Scale/Conventional Process
Inbound
- Manual harvesting of canes
- Sampling of canes is done before milling
- Canes are piled on the ground awaiting for milling
- Loading and piling in a truck and hauled to the
milling area
- Immediate processing after harvest (within 24
hours)
Operations
Sugar Cane Milling/ Extraction
- Motorized milling equipment. Materials in direct
contact with the sugar cane are made of stainless
rollers.
- Harvested canes crushed not more than 36 hours
after harvest
- Juice is placed in large stainless vats and should not
stay more than 12 hours after extraction
- Extraction in an open area
- Cleanliness is properly observed.
Filtration
- Extracted cane juice is filtered to remove leaves,
bagasse, and soil particles.
Cooking/ Evaporation
USIG STEAM JACKETED KETTLES
Large Scale
- Manual harvesting of canes
- Testing of purity of the canes through
refractometer
- Loading and piling in a truck and hauled to the
milling area
- Immediate processing after harvest (within 24
hours)
Sugar Cane Milling/ Extraction
- Motorized milling equipment. Materials in direct
contact with the sugar cane are made of stainless
rollers. For some plants, milling equipment has
conveyors and 2-step rollers for cane crushing.
- Extraction in an open area
- Frequent cleaning and maintenance
Filtration and Cooking
- Concrete channels, gutters and catch basins for
passage of juice are properly cleaned as well as GI
pipes
- At least two stainless strainers are used for the
39
 OPE PA DIRECT TO THE FURACE
Small Scale/Conventional Process
- 2 to 4 open pan/cast iron kawa for boiling
- Pugon is made of hardened mud and stones and
bagasse is used as fuel
- Addition of coconut to the sugar cane juice
Drying
- Continuous mixing of the sticky muscovado using a
wooden ladle in plastic basins
- Do not have own weighing scale; they weigh their
canes in buying stations of sugar centrals
- Uses only a single crusher; low sucrose extraction
rate (65%)
- Uses open vats and pans which is prone to
contamination
- Does not use steam
- Uses a series of open vats to reduce the moisture
content of the syrup
- No dehumidifier
- Uses fewer filters to reduce impurities
- Juice/syrup is manually transferred from one stage
to another
- Does not use metal detectors
Outbound
- Muscovado are packed in bulk (50 or 40kg) bags
and in retail at ½ and 1kg bags.
- Mills secure external trucking services to deliver
their products to the intended buyers
- Products are manually recorded using delivery
receipts and delivery log book
Marketing and Sales
- Face to face promotion of the products.
- Participation in locally organized trade fairs.
After Sales
- Immediate feedback from buyers via cellphones
- Replacement of bad orders as well as unsold
muscovado packs.
Summary of Differences
Processors using open pan processing
- Uses only open vats for preheating and cooking
- No evaporators and dehumidifiers
- Does no use steam for heating
USIG STEAM JACKETED KETTLES
Large Scale
entrance hole of GI pipes and catch basins for easy
cleaning
- Industrial lime is also added to help in the removal
of floating impurities
- 1 to 3 open pan for boiling are all cleaned
- Fire is controlled carefully as well as cooking time
- Visual and physical measures are carefully
followed
Drying and Packing
- Drying table and screens are stainless steel
- Storage rooms are closed
- Pallets are used for filing sacks of sugar
- Regular packing is done with electric sealer
- Re-weighing is done depending on client
specification for packing. To some, uses cartons/kilo
boxes.
- Have their own weighing scales
- Uses a series of crushers to maximize juice
extraction; higher sucrose extraction rate (95%)
- Uses combination of open pans and closed pans
which reduces the risk of contamination
- Uses steam to heat the juice/syrup
- Uses evaporators to reduce moisture content of the
syrup
- Has dehumidifier to regulate moisture content
- Uses many filters to reduce impurities
- Juice/syrup is pumped from one area to another
- Uses metal detectors to eliminate metallic
impurities
- Muscovado are packed in bulk (50 or 40kg) bags
and in retail at ½ and 1kg bags.
- Mills deliver the muscovado utilizing their own
trucks or outsourced
- Products are electronically and manually recorded
using computerized forms and delivery receipts
- Maintenance of website
- Participation in international and local trade
fairs
- Has network of distributors
- Maintains constant communication with buyers
- Maintains a policy of stock replacement for bad
orders or rejected/spoiled musocvado on
shelves.
Advantages of Upgraded Technology
- The closed pan processing reduces the
risk of contamination from impurities
- Fewer human contact; thus, reducing
contamination
40
Summary of Differences Advantages of Upgraded Technology
- Fewer filters along the process - Those using closed pan processing
- Does not use pumps for transporting the syrup/juice have cleaner facilities
from process to process - The highly upgraded facility has more
- Uses one crusher juice extraction efficiency due to the
- Does not have its own weighing scale; instead, it uses more efficient system of crushing the
the scales of transloading stations of sugar central canes
- Does not use metal detectors to reduce risk of having
metallic impurities
Processors using both open and closed pan processing
and other upgraded facilities (highly upgraded facility)
- Uses steam-jacketed kettles for final cooking
- Has evaporators and dehumidifiers
- Uses steam to for heating
- Has many filters along the process
- Uses pumps to transfer juice/syrup from process to
process
- Uses series of crushers with cutters
- Has its own weighing scale
- Uses metal detectors to reduce risk of having metallic
impurities

Alter Trade : 2 tandem cane crusher with cutter. Extraction rate is 90% of cane juice. Filtration
and sieving is done at every liquid transfer stage in the whole process.

Cane crusher / extractor for

Hawaiian and La Castellana
with single crushing step

41
 E. ITER-FIRM COOPERATIO

1. Relationships between and among Players

The relationship matrix below describes the horizontal collaboration among muscovado processors
(large and small scale) and the vertical relations between the sugarcane ARBs with the small scale
muscovado millers (i.e. TFM). From the interviews, it can be gleaned that the muscovado industry is
still very much atomistic and fragmented. There is a low level of existing collaboration among and
between players. There are existing organizations (cooperatives and association) of sugar cane
farmers but they are primarily engaged in advocacy activities. Majority of the farmers operate alone
although quite a number are members of collective groups. The Negros muscovado association is still
very much in its infancy.

Horizontal Collaboration Vertical Relationship

Farmers Muscovado Millers Farmers – Muscovado Millers
Information Sharing and Transparency
Information sharing appears to Some degree of information Small millers provide
be spontaneous between sharing especially on information to their farmer-
farmers of same sizes but is technology but people are still members on price, cost,
generally very limited between very guarded in giving out demand, and standards from the
big farms and the small farms. market info and what they miller.
consider as their “trade secrets”
or competitive edge. For conventional sugar millers
Not so much interaction cum muscovado processors,
between processors information shared is primarily
(particularly between big and on current market price of canes
small) except during meetings and the standards --- basic info
initiated by government required in procurement
agencies and PDAP. transactions.
Conventional sugar millers who
have diversified into
muscovado tend to share
information more readily with
each other.
From the interviews and
workshops, it was apparent that
millers have different
perspectives on what is a “good
quality” muscovado. Although
there exist a draft standard for
muscovado, this has not yet
been fully disseminated for
final drafting and to ensure
consistent interpretation.
Value Added Services/Cooperation and Collaboration
Main framework for PDAP has initiated the Up till the present, many of the
cooperation and collaboration is establishment of the muscovado farmers and workers already
through the agrarian reform association in Negros. To date, awarded with land titles have
communities organized by though, the group is not yet opted to sell their land and/or
DAR. However, majority of the fully functional and activities stay under the patronage of
ARCs are weak and in need of were confined to organizational their landlords.
organizational development meeting.
support. From the interviews Alter Trade provides the

42
 Horizontal Collaboration Vertical Relationship
Farmers Muscovado Millers Farmers – Muscovado Millers
conducted, it would seem that following services to partner
the better ARCs/farmer communities: production credit
organizations are those (payable after harvest),
supported by Alter Trade. training/technology transfer,
and organizational
development. TFM also
provides loan for their
members.

The ability of the

sugar farmer-beneficiary to
sustain the land by himself/
herself or with his/ her
cooperative’s support is again
especially crucial in Negros
Occidental, where the patron-
client relationship is so deeply
embedded in the culture and has
made the farmer very much
dependent on his/her landlord to
this day.
Supplier and Buyer Selection and Procurement Process
Main market of farmers is still Main suppliers of Altertrade
the conventional mill. In terms and TFM are their members.
of price and financial income, When these mills have enough
there is no significant difference supply or have suspended
between selling to muscovado temporarily their operations, the
mills and conventional mills. member-farmers sell to the
Main difference is on the terms conventional mills. Others who
of payment. Muscovado millers are under the assistance or are
generally pay upon delivery. partners of the muscovado
millers (e.g., partner
communities of the Alter Trade
Manufacturing Inc. and the
Task Force Mapalad) are the
main suppliers of such mills.
However, in instances where
the mills are out of service or
are in full capacity, the partner
suppliers may opt to mill in
conventional sugar centrals.
Alter Trade schedules their
procurement of canes from the
different groups that they are
supporting.

For conventional cum

muscovado plants, they source
from own farms
(leased/owned).

43
2. Distribution of Costs and Profit

From the waterfall chart, it can be seen that processors add the most value to the product (51%),
followed by distributors (30%), and then the farmers (18%). Fixed investment for a muscovado plant
with a 2.5 ton capacity
city per day is estimated to range from PhP 2.5 to PhP 3 million. Among the
different players, processors incur the highest investment cost and also get the highest profit margin.
Conventional sugar cum muscovado millers are in a better position than sta stand
nd alone muscovado plants
as they are able to optimize the use of their mills as well as take advantage of their existing
infrastructure (e.g., power generated from waste/bagasse, etc.). It should also be noted that although
farmers get the 2nd highest % inn the profits, the higher price obtained by muscovado products in the
markets vis-à-vis
vis white sugar does not translate to significant differences in net income of farmers as
they get relatively the same price for their canes for both conventional and muscovado
musc millers. In
Alter Trade’s case though, the premium prices are returned to farmers in the form of services and
dividends/community fund.

The relatively low profit margin of distributors may be attributed to the fact that the domestic market
for muscovado is still not well--developed
developed and, as such, significant investment has to be made in
promoting the product. Likewise, to penetrate markets and given that there are quite a number of
product substitutes, distributors have to balance between consum
consumers’
ers’ perceived value of the product
and profitability.

To improve profit margins of all players, concerted efforts are needed to reduce inefficiencies and
enhance quality at all links of the chain.

44
 SECTION 3:
END MARKET ANALYSIS

A. EXPORT MARKET TREDS

The Philippines has been exporting muscovado as early as 1850, and up until the late 1970s it was
among its more prominent exports. The growth of the popularity of refined white sugar displaced the
muscovado to the fringes of the sugar marke
market. In recent years the growing trend for organic products
and healthier lifestyles revived the muscovado industry. With consumers preferring to lessen their
chemical intake, market demand has grown.

2008 Muscovado Volume and Value of Exports According to the commodity

Voulume of Exports Value of Exports factsheet (2007) of the
COUNTRIES (Kg) ($FOB) $ FOB/Kg Department
epartment of Agriculture, a total
of 1,815.04 metric tons of
Japan 327,910.00 427,315.81 1.30
muscovado was exported to
Germany 405,510.00 641,202.70 1.58
different countries with an
Italy 276,440.00 393,103.96 1.42
aggregate value of PhP 101.84
Switzerland 292,650.00 383,832.00 1.31
million. Main countries of
France 57,350.00 95,924.00 1.67 destination were Japan (28.7%),
South Korea 148,750.00 231,581.50 1.56 Germany (19.7%) and Italy
USA - (1.2%). In the same year, 13.60
Malaysia 68,250.00 83,243.30 1.22 metric tons of Panocha (similar to
Saudi Arabia - sangkaka) was exported to the
Cananda 15,000.00 12,000.00 0.80 United States (54.1%), Canada
Netherlands - (18.2%) and United Kingdom
Austria 15,000.00 22,769.28 1.52 (12.3%) with a total value of
Hongkong 20.00 26.21 1.31 PhP1.1 million. There was a 54%
Total Philippines 1,606,880.00 2,290,998.76 1.43 increase in the volume of exports
Source: SRA Regulation Department in 2007 over 2006 performance.
Note: Volume and Value are based on SRA enlisted and licensed traders In
n 2008, export volume decreased
by 11% over 2007 figures.

In a report from the Sugar Regulatory Agency, the top muscovado importing countries for 2008 were
Germany (27%), Japan (22%), Switzerland (19%) and Italy (18%). Other importing countries include
USA, France, South Korea, Canada, Saudi Arabia and Malaysia.

45
 In terms of the value of exports,
there was an overall slight
decrease of 5% in 2006 over
2002 export sales. FOB prices
for muscovado exports to Japan
and Italy increased by 24% and
27%, respectively.
ctively. On the other
hand, Germany and Switzerland
FOB prices decreased. Although
US FOB value of exports
showed an erratic trend during
the period 2002-2007,
2002 there was
an overall average increase of
7%.

The country is the 16th biggest

muscovado exporter worldwide,
with Brazil holding the top spot.
Decades of neglect resulted to low farm productivity and undeveloped marketing channels.

The Negros muscovado production --- bulk of which is from Alter Trade --- is geared for the export
e
market. However, during this year, Alter Trade suffered about 40% decrease in production due to the
world financial crisis. In addition to that, orders from the European market dropped by 50%. For the
current year, its last operation was last April. A shut down was also necessary in order to repair its
boiler which is a major equipment. This situation has prompted Alter Trade to expand its domestic
market by joining local trade fairs and aggressively seeking new buyers in other geographic areas.

B. Domestic Market

Sugar Market in the Philippines

Sugar is classified by Sugar Regulatory Administration (SRA) into “A” for export to the US, “B” for
domestic consumption, “C” for reserves, and “D” for export to markets other than the US and for
local food manufacturers.
anufacturers. Domestic sugar consumption is measured by monitoring sugar withdrawals
from the mills. Consumption for 2008/9 is projected to be at 1.90 million MT. Because of the fear of
shortfall, SRA has increased allocation of this commodity for local cconsumption
onsumption in the 2009-2010
2009
crop year. The SRA, together with the Philippine Sugar Millers Association Inc. (PSMA), has
allocated 1.944 million MT. This is equivalent to 90% of the expected 2.16 million MT raw sugar
production this year for the domestic market, which is more than the 1.4 million MT last year.

Data from BAS shows that prices of refined sugar have increased to PhP 42 42-48
48 per kilo as of 10
December 2009 from PhP 42-46 46 as of last week of November and PhP 39 – 42/kg as of same period
last month. The domestic market is experiencing tightness in refine
refined
d sugar supply, as traders started
stocking up last month ahead of the holiday season and in the face of rising prices.

Beverage sector consumes 30% to 37% of the country’s production of refined sugar. Processed food
exporters need about 20,000 MT of ref refined
ined sugar a year as preservative and additive for their
products. Last October 2009, the Philippine Chamber of Commerce and Industry (PCCI) requested
government to revisit the new policy on sugar as promulgated in the latest Sugar Regulatory
Administrationn (SRA) Order # 11-A A of November 3, 2009. This order terminated the 6% Class D- D
Quedan sugar allocation and transfers the equivalent volume to Class CC-1,
1, or strategic reserve sugar
for domestic and US markets. Immediately, this policy essentially cuts off th
thee supply of sugar for the
export sector, specifically the food processors. In 2010, when the ASEAN Free Trade Area–Common
Area
Effective Preferential Tariff (AFTA
(AFTA-CEPT)
CEPT) is fully implemented, the viability of food export is

46
further threatened as more developed aand cost-efficient
efficient trading partners in the region will be subject
only to a 0-5% tariff.

The processed food sector can potentially be a market for muscovado especially those that intend to
diversify into the organic market. However, product and market ddevelopment
evelopment would require intensive
collaboration between muscovado processors and the processed food exporters and investment.
Likewise, price competitiveness of muscovado vis
vis-à-vis
vis other substitutes has to be improved.

Muscovado Market

Phone interviews were

conducted with 46 supermarkets
and food establishments in
Metro Manila. The food
establishments consisted of
restaurants, hotels, coffee shops
and bakeshops. 85% of the
respondents said that they are
buying muscovado while 15%
are non-users/buyers
/buyers of
muscovado. Reasons given for
non-purchase/non-useuse of
muscovado sugar were the
following: a) expensive
compared to brown sugar; and
b) does not have the needed
sweetness compared to white
sugar. Another respondent
claimed that the product was
perceived as not clean.

Main product format purchased

by respondents is the refined or
amorphous muscovado. Two
establishments (1 hotel and 1
restaurant) indicated that they
purchase solely muscovado
rocks for coffee and tea.

90% of the supermarket

respondents
ndents were purchasing
muscovado of different brands.
Most common brands purchased
were AlterTrade and Hawaiian.
Among the food establishments,
100% of the bakery shop
respondents were aware of
muscovado and purchase the products on a monthly basis at a vo
volume
lume of 10kg per month. Higher
purchase volume was observed during Christmas season and All Souls/All Saints Day due to increase
demand for native delicacies that require muscovado.

Restaurants are seasonal purchasers of muscovado depending on recipes anand

d festivities. 83.5% of the
interviewed coffee shops are seasonal buyers, purchasing only when customers demand the product
and at an average of 1-2kg
2kg per month. 55% of hotels purchase less than 10kg while 18% purchase the

47
products on a seasonal basis. 27% of hotels said that they only purchase muscovado depending on the
requirements of the kitchen and this is on an irregular basis.

For supermarkets, responses with regards to volume are varied. 33% of the respondents have an
average monthly volume of 100k
100kgg while the other 33% responded to have a monthly purchase volume
of 10kg. Generally, processors have difficulty selling through supermarkets due to several factors:
supermarkets charges high slot/listing fees; takes too long to pay (about 3 months) and products
p are
on a consignment basis and returns damaged products to the consignee at the consignee’s expense.

The food establishment respondents stated that they source their muscovado from the supermarket
(82%). Establishments with less than 2kg required volume as well as Hotels purchase their
muscovado from the supermarkets using any brand available. The most common brands purchased
and distributed by the supermarkets interviewed were Alter Trade followed by Newcrest and then
Hawaiian. Coffee shops such ass Café Briton source their muscovado rocks from Peotraco Inc., a
distributor in Manila that sources its supply from Hawaiian Philippines of Negros.

C. Market Standards/Requirements

1. General Requirements of buyers of Muscovado

General Requirements for Muscovado

Appearance Golden Brown with minimal small lumps and without foreign
materials
Taste and Flavor Sweet and without off flavors
Weight / Packaging In sacks with 50kg or 40 kg weight

48
2. Requirements of Buyers for Export

General Requirements of Muscovado for Export*

Appearance Light brown/ golden brown, partially crystalline, powder showing
minimal small lumps. Without foreign materials. (per client
specification)
Taste and Flavor Sweet and without off flavors (per client specification)
Weight / Packaging In sacks with 50kg weight
Physical and Chemical Moisture: 2.3% - 3%
Standards Lumps > 5mm: 0-0.5%
Lumps<5mm: 0-20%
Insoluble solids:0-0.2%
Total sugars (sucrose + glucose + fructose): >92%
Ashes: 2.2% - 2.4%
Pesticides Residuals: 0% Reg CE 2092/91
Heavy Metals (Max tolerance): Arsenic (As)- 1ug/kg, Copper (Cu)
– 0.2 mg/kg, Lead (Pb)- 1.5 ug/kg
Microbiological Standards Total Plate Count (cfu/g): 0-103
Yeast (cfu/g): 0-103
Molds (cfu/g): 0-103
Enterobacteriaceae (cfu/g): 0-103
Nutritive Value of Energy (cal) 373
Muscovado per 100 g Protein (g) 0.2
Carbohydrate (g) 95.5
Calcium (mg) 80.3
Phosphorous (mg) 5.7
Iron (mg) 2.48
Magnesium (mg) 15.5
Zinc (ppm) 3.01
Product Weight Muscovado: 1002.0 g
Bags and 2 labels: 10.5 g
Total gross weight: 1012.5 g
Packaging Materials Bag made by virgin Polyethylene “Food Grade”
Labels in bag (per client specification)
Printing in cartons (per client specification)
*Source: Panay Fair Trade Center, Oton Iloilo

Compliance to food safety standards for processors is required such as GMP and HACCP protocols as
well as product registration certification from the BFAD. Some millers are leaning towards organic
certification of Muscovado.

Impurities such as insects, hair, etc. are the main reasons for rejects in the Japanese Market while
Europe is strict on pesticide traces, acrylamide and moisture content (1.5% to 2.5% MC).

49
 SECTION 4:
SUPPORT MARKET
A. PROVIDERS

1. Sugar Regulatory Administration

- Technical Assistance/advice – farm
productivity, sugar mill audits, quality
assurance, milling and refining
improvements n and standards development
- Trainings on GAP for sugar cane production,
IPM, sugarcane by-products
- Laboratory Analysis – soil analysis, sugar
quality analysis
- Regulatory Services (permits and licenses)
- Research and development for HYVs
- Market information (local and international
supply and demand)

2. Department of Trade and Industry

- Support to Market development
- Linkage with buyers
- Coordination and organization of trade fairs
- Market information
- Organizational support to the newly formed
Negros Muscovado Industry Association

3. Department of Science and Technology

- Provides training on good manufacturing
practices in muscovado production.
- Assist in the design of processing plants and
extraction equipment.

4. Bureau of Food and Drugs

- Provides training on Good Manufacturing
Practices
- Provides BFAD certification to products and
processes which passed the agency’s safety
and sanitation standards

5. Negros Muscovado Industry Association

- Vision: an integrated and sustainable
muscovado industry in Negros Island
- Mission: promote development thru
partnership building and fair trade
mechanism
- Newly formed industry group initiated by
PDAP with DTI acting as the secretariat in-
charge of calling for meetings and setting the
agenda.

Not yet operational except for organizational

meetings.

50
6. Alter Trade Group
- The foundation identifies, capacitates partner
ARB producers – 19 communities with 879
farmer producers on organic farming and sugar
cane production practices
- Advocates diversified farming among its
communities
- Provides technical advice and ensures that
partner communities adhere to organic
standards of muscovado production
- Services provided to partner communities
o Provides credit assistance (fertilizer loan
and credit on production) to partner
communities– payable after harvest
o Production technology downloading and
coaching (sustainable agriculture: i.e
organic farming practices)
o Organizational development and
strengthening which includes planning for
the utilization of the fair trade funds.
o Conduct of women orientation to help
communities realize the role of women.
Women in sugarcane production:
preparation of planting materials, planting,
weeding and fertilization. 45% of partners
are women
o Pre-milling tests conducted in the field

18 brix minimum

Delivery to mill site from cutting, within 24 hours

7. Task Force Mapalad

- Manages the community based muscovado processing facility in La Castellana Municipality
along with the La Castellana Agrarian Reform Beneficiaries Multipurpose Cooperative.
- Has been assisting various agrarian reform beneficiaries in their quest for landownership and
sustainable livelihood.

8. Negros Oriental Institute for Rural Development (NIRD)

Established in 1999 in Canlaon Negros, NIRD is a non-government development organization

working for sustainable development and democratization in the province of Negros Oriental,
Philippines. NIRD’s programs and services are designed to realize its vision for rural
development and democratization through an integrated area development approach. Its
interventions are intended to contribute to the broader range of concerns to attain social
transformation in the rural areas. n coordination with the Department of Agrarian Reform (DAR),
NIRD has facilitated the transfer of land ownership of 1,248 hectares of sugarland in Canlaon to
987 agrarian reform beneficiaries, who were then, seasonal farm workers of these sugar estates.
(Source: http://nirdspage.blogspot.com/).

Currently, NIRD has been supporting the set-up of a community based mucovado processing
plant. The study was not able to conduct interviews with NIRD technical personnel as they were
not available during the workshops.

51
9. SIMAG Foundation, Inc.

- Vision: Serve as catalyst in transforming a home

in a sugarcane farm to a prosperous household in
a progressive community.
- Mission: Assist each SIMAG member in
maximizing its full potential by providing
professional opportunities and services.
- It is the foundation of two planters associations
milling under the Philippine-Hawaiian Co.
- Its members are members of the Asociacion de
Hacenderos de Silay-Saravia, Inc. (AHSSI) and
Dirk Bakker and Rene Guarin
Associated Planters of Silay-Saravia, Inc.
(ICCO) with Simag Exec.Director
(APSSI)
Jay Jalandoni and Admin. Staff
- The beneficiaries of the foundation are the heirs Wilman Natuael.
and workers of the SIMAG members.
- Operations funds for the foundation come from the self imposed levy of the SIMAG members
of Php 1.52/ 50kg bag of sugar produced. These funds are used to implement their programs
for the community based organizations they have supported.
- Among its activities/programs are:
o Education and Educational assistance program
o Health programs
o Livelihood, entrepreneurship and financial assistance program
- Organizations supported by the foundation
o Silay-Saravia Small Farmers Association, Inc. – group of 17 small farmers cooperatives
o Silay-Saravia Women’s Association, Inc. – 18 primary groups with 296 total members
o SIMAG Volunteer Health Workers Organization, Inc. – 146 volunteer health workers
o SIMAG Federation of Multipurpose Cooperatives, Inc. – 21 cooperative members
o SIMAG Youth Multipurpose Cooperaive, Inc. – 320 youth members
o Primary Cooperatives – 128 primary cooperatives
- Assistance to San Vicente 1 MPC’s muscovado venture has been turned over to the
foundation by MUAD since members of the San Vincente ARB are operating within the Silay
Area which also mills to Hawaiian.
- Thru the partnership with Hawaiian Philippines, the foundation has trained youth members in
muscovado processing and these are now hired by Hawaiian specifically in the packaging
operation of muscovado sugar.

10. Multi-sectoral Alliance for Development - Negros

- Vision: An improved quality of life in the island of Negros through a strong and sulf
sustaining alliance
- Mission: MUAD Negros shall promote development programs and services to its member-
affiliates and covered communities for poverty alleviation.
- Its programs aim to assist 10,000 poor families by 2013 through the establishment of stable
sources of livelihood, access to basic social services and balanced environment and effective
governance.
- Programs include:
o Conservation of Biodiversity and Resources Enhancement for Upland Dwellers (CREB)
o Advancement of Education Services for the Adults and Youths (EASAY)
o Rural Enterprise Advancement Program (REAP)
o Enhancement of Networking and Linkage Building for Development (BLEND)
- Had partnership with PDAP in the assistance and setup of a muscovado processing facility
under the San Vicente 1 ARB MPC

52
 - Had since transferred this responsibility of assistance to SIMAG Foundation, Inc.; terms and
documents related to the transfer and previous setup and assisitance to the cooperative is still
unclear as no documents have been endorsed to SIMAG.
- Provides supervision and assistance to Federation of Agricultural Resource Managers, Inc.
(FARM Inc.) which is the marketing arm of the MUAD-assisted enterprises. FARM Inc.
retails and distributes rice, banana, papaya and muscovado. Currently, its supply of
muscovado is sourced from Seed Trade.
- Included under its original responsibility to the PDAP- assisted muscovado plant project (San
Vicente 1 ARB MPC) is the marketing of muscovado

11. Philippine Sugar Technologists Association – PHILSUTECH

PHILSUTECH is an organization of composed on individuals and institutions with stakes in the

sugar industry nationwide providing the venue for information exchange on the latest science,
technology and economics relating to sugar production. It is recognized as the technology
provider of the Philippine Sugar Industry and promotes the exchange and sharing of technical
information among members. Discussion with the past president of Philsutech and the secretary
gained positive reaction on the possibility of small muscovado millers becoming members of the
organization and, as such, can access upgraded technology and networks of the sugar industry.

B. DOOR PROGRAM

Philippine Development Assistance Program Inc. (PDAP)

• Muscovado is one of the product focus of the PRIME project of PDAP. Current initiatives include
installation of internal quality control systems and market linkage, financial access thru provision
of a guarantee fund mechanism in partnership with financial institutions. The project has
conducted a series of nationwide summits and conferences aimed at bringing together the
different stakeholders in the muscovado industry.
• In Negros, it is assisting the construction of a muscovado processing facility in Silay City and to
be operated by the San Vicente 1 ARB MPC. The project was originally co-assisted by MUAD
and now turned over under SIMAG’s assistance. The facility is yet to operate and still needs an
estimated P800,000 more funding in order to start.
• This prime project is scheduled to end on 2010.

C. RECOMMEDED PROVIDERS (from ICCO commissioned study)

This is extracted from a study conducted by the John J. Carrol Institute (September 2009) on the
Demand and Supply Characteristics of financial and business development services for Agrarian
Reform Beneficiaries in the Philippine. The table below list down the services needed by La
Castellana ARB and the recommended possible financial and BDS service providers within Negros
Occidental.

Service eeded Recommended/Possible Comments/Remarks

Providers (SDCAsia)
Financial Services
Access to available production Micro finance Institutions DAR and LandBank would
loans with affordable interest (MFIs) and other development require organized groups that
rates and easy terms oriented banks, Dept. of are legally accredited to be able
Agrarian Reform (DAR) to access such loans.
through the Credit Assistance

53
 Service eeded
Capital for upgrading of the
Muscovado mill
Loans for other livelihood and
consumption/ other household
needs
Business Development Services
Training on the adoption or
organic farming and the
appreciation of lower
productions costs which will
eventually result to higher net
incomes
Sustainable Agriculture
technology transfer
Strengthening farmers
organization
Inform the farmers about the
market (current prices, potential
destinations of their product,
etc.)
Improved market information
flow (pricing, marketing outlets,
new technologies) and
accounting systems through
trainings/seminars
Source: Demand and Supply Characteristics of financial and business development services for Agrarian Reform Beneficiaries in the
Philippines. JJCICSS Occasional paper. Sept. 2009
Recommended/Possible
Providers
Program – Program for
Beneficiaries Development
(CAP-PBP) and the Land Bank
of the Philippines
DAR, Dept. of Agriculture
(DA) thru Agricultural Credit
Enhancement Program (ACEP),
Dept. of Land reform, Land
Bank, local and foreign donor
institutions
MFIs, LACARB – MPC
DA thru Farmers Field Schools
(FFS) in partnership with
KASAKALIKASAN program,
Sugar Regulatory
Administration (SRA), stand
alone organic farming experts,
Alter Trade Foundation and the
Orgnaic Certification Center of
the Philippines (OCCP)
TFM, other BDS providers
either NGOs of private sector
UMFI, DTI, conduct research
or marketing study for
muscovado sugar or tie-up with
other NGOs who are doing
marketing study like PDAP
Comments/Remarks
(SDCAsia)
Large sugar mills may also
provide loans at 0% interest
rate.
ACEP requirements and
processes would take 6 month
to 1 year before approval. ---
and sometimes longer.
These loans are dependent on
the availability of funds and are
not always available.
Government extension services
are spread too thinly and
dependent on budget. It would
be good to tap recommended
providers to assist in the
development of community-
based delivery of training
services
It may be necessary to first
build up capacity of providers
to provide business-oriented
organizational development
support --- infuse market and
business orientation.
Altertrade Marketing
Corporation is a rich source of
export/domestic market
information and market
standards
Hawaiian Philippines and
Sagay Central are also good
sources of information.
Likewise, it may be possible for
these companies and Alter
Trade to act as marketing
consolidators since they have a
vast network and resources.
54
 SECTION 5:
ENABLING ENVIRONMENT

A. O SUGAR TARIFF AD TRADE LIBERALIZATIO

1. Under the ASEAN Free Trade Agreement (AFTA) mechanism, the Common Effective
Preferential Tariff (CEPT) system requires that tariffs levied on commodities traded in the region
meeting a 40% ASEAN content requirement be reduced to 0 to 5% in January 2010. In the case of
sugar it is pegged at 5%.

Many industry players believe that the impending reduction of sugar tariff in 2010 will lower
price of sugar due to the influx of lower priced imported sugar. Millers and/or refineries may not
be able to compete with the imported sugar. To mitigate the potential negative effects on the
impending tariff reduction, sugar companies are expanding into bio-ethanol production and other
sugar cane by-products such as muscovado.

2. Small sugarcane producers aligned with the Philippine Partnership for the Development of
Human Resources in Rural Areas (PhilDHRRA) are appealing to the government to delay
lowering the tariff cover on sugar to give sugar sector more time to adjust to trade liberalization.

The small sugarcane stakeholders are also urging a medium-term development plan that should
include plans for a diversification of crops to offset the impact of tariff reduction; promotion of
organic sugarcane production as an alternative industry; more investments in research and
development and full implementation of the Comprehensive Agrarian Reform Program (CARP).

Small sugarcane farmers also want more representation in sugar alliances and milling
organizations to be able to claim needed support services and policies for their sector; a more
equitable 60-40 farmer-miller sharing of sugarcane proceeds, as well as better access to credit,
technical assistance and other agri-extension services.

They are also asking for lower tariffs on fertilizer inputs to lower their cost of production; a
review of sugar classifications and quedan bidding systems and stopping sugar smuggling from
other countries.

B. LEVY IMPOSED O SMALL FARMERS

Another issue confronting small sugar landowners is the move of the SRA to continue imposing a
levy of PhP 2 (three cents) per kilogram of sugar produced. Sugar Order no.2 Series of 1995-1996
provided for a lien of Php 2.00/l kg bag on all sugar produce in favor of PHILSURIN. It is due to
expire 31 August 2005. The SRA’s Sugar Order No.8, Series of 2004-2005, issued August 18, 2005
provides for the continuity of Sugar Order No.2.

As per the United Farmers Association of Negros – South Inc. (UNIFARMS), an association of small
sugar landowners affiliated with the United Sugar Planters Federation (UNIFED), the additional levy
is illegal and confiscatory. The group said that there has been no consultation and no clarity where the
money should go except for the vague monitoring service fee and supposedly as source of funding for
PHILSURIN.

Due to vehement protests from various sugar federations, SRA suspended last August 30 the
implementation of Sugar Order No. 8. As per the various sugar cane organizations, they would not
oppose the PhP 2.00 levy if it will be used to fund a campaign to curb the smuggling of sugar and the
formation of an Anti-Smuggling Task Force.

55
C. GOVERMET SUPPORT FOR THE MUSCOVADO IDUSTRY

Musocvado was identified among the Revenue Streams in the Product Strategies of the Philippine
Export Development Plan from 2004-2007 and from 2008 to 2010. The PEDP is prepared by the
Export Development Council (EDC) under DTI. Main focus was to adopt organic certification
standards with guidance from DA-BAFPS.

DTI thru the Center for International Trade Expositions and Missions (CITEM) has been continuously
conducting marketing campaign for muscovado as one of its priority product for export promotions.

D. DOMESTIC SUGAR SUPPLY

Depleted world market supply and drop in world sugar production among the world’s biggest sugar -
producing countries have led to high world prices and similar price spikes in the US market which
called for the creation of “C-1” strategic reserve classification to take advantage of possible export
opportunities of Philippine sugar if local supply / demand conditions allow for the export of any
excess.

SRA also allocated an adequate volume of “D” sugar for qualified food processor-exporters / CBWs
in order to promote the growth of this vital sector of the Philippine economy. To ensure adequate
domestic sugar supply while maintaining a strategic balance conducive to a stable and viable market
environment and to enable the timely and effective merchandising of Philippine sugar, the following
sugar allocations at the start of crop year 2009-2010 were promulgated by the SRA Sugar Board: a)
“A” or US Quota Sugar – 4%; b) “B” or Domestic Sugar – 90%; c) “C-1” or Strategic Reserve
Sugar – 4%; and d) “D” or World Market Sugar – 2%.

E. O FARM SIZE

Too many CARP beneficiaries share on the land they work on, thus the three-hectare maximum share
per beneficiary was not often met under Republic Act 6657 or the Comprehensive Agrarian Reform
Law of 1988.

56
 SECTION 6:
GENDER ISSUES

A. GEDER DIVISIO OF LABOR

1. While both men and women in sugar cane farming households engage in labor both productive
and reproductive and while these work burdens take up the greater part of the 24-hour24 day
(sometimes up to 15 hours of labor for both men and women), the labor undertaken by men is
privileged in that it has more monetary value as well as psychological value. For example, manual
weeding, which is usually done by women, is paid only about half of the daily wage paid to men.
For years, the women in the hacienda are considered “second class” laborers and receive only
about half of a man’s daily wage in the sugar farms, even if they worked the same number of
hours and performed the same tasks. Women
also help men in other tasks in the farm but
these are also not given enough significance.
These substantial contributions to
agricultural production, however, are largely
considered (by both men and women) as
secondary and supplemental to the labor
done byy men, instead of essential or
fundamental to the production process. This
is due to a number of factors, including the
more physically-demanding
demanding nature of work
Sugar Cane Grower presenting
done by men, and the traditional mindset the outputs of the workshop (an
that farm work is done by men. As such, the Alter Trade Partner)
income thatat is derived from the agricultural
production is largely considered as income
produced by the men. Women do not
consider this income as deriving from their labor as well. Men, therefore, are considered as the
primary income-earners.

What this implies, is that in undertaking interventions to increase farm productivity or raising
household incomes, the labor and value of work done by men and women need to be recognized
and properly accounted for to ensure that any additional work involved in undertaking such s
interventions do not result
in reinforcing such
differences in labor
valuation.

2. In muscovado
processing, women are
involved in post-
post
processing activities
particularly packing. They
are paid by piece or by
“pakyao (bulk) system.
Men are preferred for
processing activities
because these are
physically-demanding
physically
tasks.
AlterTrade employs women to perform packing and quality control
tasks. Similar to Hawaiian, the women are doing packing and weighing According
rding to Bacolod-
Bacolod
activities, while men are employed as cook.
57
 based independent social research outfit Center for Integrative Research, Advocacy and
Multimedia Services (CIRMS), the “pakyao” system became more rampant in many haciendas.
The use of the pakyao work system and other forms of contractualization has increased by 330
percent from 1995 to 2006, meaning that practically 3.5 of every five sugar plantation farms with
sizes of 10 hectares and above use the pakyao and contractual work scheme. In sugar mills, there
is rampant use of labor-only contracting, contractualization, indirect hiring or hiring through
private agencies.

Likewise, CIRMS report also indicates that more than half or 64.7 percent of 1,936 medium (25 –
49 hectares) and big (50 hectares and above) sugar farms in Negros are paying less than the
minimum wage and engage in discriminatory wage arrangements for women. Minimum wage
compliance is higher in small farms (24 hectares and below) than in big farms.

Muscovado production under the Fair Trade system has potentials of protecting both women and
men’s rights to equitable wages and working conditions.

B. ACCESS AD COTROL OVER RESOURCES

1. Women's actual contribution to sugar cane production and rural economy remains undervalued if
not invisible. As a result, women have less access to productive resources than men do. Access to
land, technology, extension services, capital, and infrastructure support tend to favor rural men.

With regards to the CARP, there are more men beneficiaries than women. The Senate and the
House of Representatives' reconciled versions of the CARP extension contained an amendment
prioritizing regular farm workers and tenants as agrarian reform beneficiaries. Critics believe the
"killer" amendment will either dilute or reverse the gains of the program by further
disenfranchising seasonal farm workers. This amendment also makes it more elusive for women
to own land via the CARP since women are generally seasonal workers.

For resources owned by the household (especially farming resources), men exercise a greater
degree of control compared to women. This goes hand in hand, however, with greater
responsibilities by men in the maintenance and care of such resources.

2. Households associated with sugar production require other sources of income for their livelihood,
generally provided by the off-farm employment or family farming of female family members.
However, women on the plantation have limited access to resources for production and, therefore,
income. They do, however, have sufficient time to engage in diversified sugar-based food
production and livelihood activities. It is thus important to incorporate them in the land reform
process and in the design of support services.

The tiempo muerto or dead season in the Negros sugar industry, which runs from April to August,
has become a year-round nightmare for sugar workers. The tiempo muerto is very distinct in
Negros which is a monocrop sugar-based economy. Unlike in other sugar provinces like
Bukidnon, Iloilo, Cebu and Batangas where neighboring provinces have diverse economies, most
people in Negros live and thrive only on the sugar economy. Even the dominant service sector,
wholesaling and retailing businesses in urban centers are very much dependent on the behavior of
the sugar industry; thus if the sugar industry suffers crises, urban-based businesses also feel its
ripple effects. It is usually the women who are carrying the burden of feeding their families. For
both women and men in the Negros sugar industry, there is a need for “safety nets” and
diversified income sources.

58
 SECTION 7:
CONSTRAINTS AND OPPORTUNITIES

A. OPPORTUITIES:
1. Negros muscovado products
particularly those from Alter
Trade and Hawaiian Philippines
are recognized by distributors,
retailers, and institutional buyers
to be of premium quality.
Likewise, the province is known
as the “sugar bowl of the
Philippines” and has a long
tradition as the home of
innovative and export quality
products (gifts and housewares/
food products). Negros products
are, however, also reputed to be
the more expensive compared to
similar products. For the Negros
muscovado industry to
significantly expand its market
share in the muscovado trade, it
has to focus on product
differentiation parallel to
improving efficiency to boost
competitiveness and profitability
for all players. Improving the
ability of players in the
muscovado industry to command
premium prices for their
products would also, hopefully,
translate to higher farm gate
prices for sugar canes and added
value services to farmers.

2. The presence of established

exporter such as Alter Trade and
conventional sugar mills
expanding into muscovado
production can facilitate the
entry of small scale millers into
the export markets through
consolidated marketing and
vertical integration or network
relationships.

3. Industrial food processors with

natural/organic/healthy food
product lines are potential target
markets. This would, however,
entail joint R and D which can

59
 be spearheaded by the large
muscovado mills (sugar mills).

B. COSTRAITS

The constraints presented below

are from the perspective on how
sugar cane farmers can improve
their income generation capacities
through development of the
muscovado industry. Except,
perhaps, for farmer organizations
under Alter Trade, there is no
significant difference in the net
income received by farmers from
selling to muscovado mills vis-à-
vis conventional sugar mills. This
can be attributed to the following:
a) low farm productivity; b) current
capacity of ARB managed and
operated farms to provide
alternative markets for canes is
limited (except Alter Trade); and c)
the need for improvement of cane
procurement terms and conditions.
These factors are, in turn, results of
the following key constraints:

1. Limited access to financial and

non-financial services to
facilitate upgrading

Extension services are mainly

provided by government which
experience pronounced financial
constraints and inability to increase
depth and breadth of outreach.
There is lack of agricultural
extension workers. This
inadequacy limits any extension
service to occasional basis rather
than the required sustained regular
activities. This may also explain
why ARBs generally feel that they
did not receive any support
services from the government.
Likewise, training venues are
outside of their immediate locality
which pose both time and resource
constraints. The CARP has
excessive stress on landownership
redistribution without concomitant
attention to support services.

60
Generally, sugar cane farmers lack access to the following: a) better yielding variety; b) capital to
implement proper farm maintenance/ good quality inputs, etc. --- access to financial services very
limited or none at all for smallholders; c) irrigation; d) technology/ knowledge and facilities on
proper land preparation technique and method/ good agronomic practices; and e) services and
resources that would facilitate compliance/adoption of Good Agriculture Practices (GAP) in sugar
cane production. Likewise, the economics of upgrading has to be proven/demonstrated to farmers for
them to be willing to invest time and resources as well as reduce risk aversion.

The system of redistribution under the agrarian reform law, where government purchases the land
from the landowner at nominal value without regard to improvements and equipment, has halted
investments in irrigation, soil amelioration, and new equipment. Moreover, since banks cannot
foreclose mortgaged lands and sell them on the open market, government being the only buyer by
law, financing by banks has ceased.

The sugar industry has relied for too long on research and development to be undertaken by
government. The trend in many sugar producing countries has been to privatize this activity as no one
will look after the benefits of R & D, search for new technologies, or innovate production processes as
much as those who stand to benefit the most. The SRA is mandated by its charter to privatize R & D
but the private sector thus far refuses to assume the full responsibility and enforce the collection of a
lien paid by all producers to carry out this mandate. There is a lot of opposition on the lien and, as
such, industry foregoes the benefits of the latest technology because it refuses to pay for it
collectively.

The small muscovado mills have difficulties in complying with market standards and to achieve
optimum operations efficiency primarily due to the following: a) Lack of access to technology,
technical expertise, financial, and systems necessary to upgrade products, operations, and practices
that improve productivity and the food safety and quality of products; and b) High cost of certification
and compliance/implementation of corrective measures to structural and operational deficiencies.
Both the conventional sugar mills and stand-alone muscovado mills are also on a “wait and see”
attitude given that the muscovado domestic market is still not that well-developed. Likewise, to some
extent, the cane sharing scheme to pay farmers for the sugar cane it brings to mills for processing,
which is also employed by conventional sugar millers cum muscovado process, provide little
incentive for firms to modernize and improve their efficiency.

2. Lack of entrepreneurial orientation

The lack of entrepreneurial orientation among sugar cane farmers is to a significant extent a reflection
of the perpetuation of the paternalistic relationship common in sugar plantations. It can be inferred
that the fixed social arrangements developed in the hacienda by the landlords centuries ago had
caused the shadow of paternalism and dependency in the lives of the farming people. These formed
the farmers' framework of values and these also negatively influence their farming performance. It is
important for the farmer to gain entrepreneurial skills in running his farming business in order for
him/her to manage their farms well.

3. Lack of economies of scale/Weak horizontal cooperation/Poor organizational dev support

Sugar cultivation requires tractors for deeper plowing; farms that employ carabao-pulled plows yield
much lower harvests. Since using a tractor makes sense if one is cultivating 20 to 30 hectares, small
farmers must get together to hire a tractor; hence, some institutional development is crucial.
Individual procurement of fertilizer for a small farm translates to higher cost per bag. Each hectare
cultivated entails capital requirements ranging from inputs to labor and fixed capital, which may not
be easily put up by an individual farmer. Likewise, due to diseconomies of scale and the lack of
bargaining power, the unit production cost is high.

61
Planters in a milling district have an association which helps them deal with the mill to get fair
valuation of the sugar content of their cane and for other purposes. ARBs need to get organized to
gain representation in the association but they also need to learn how to deal with other association
members. Generally, small farmers lack entrepreneurial skills and capacity to interact effectively and
to undertake collective action, which is necessary to induce firms to accept a high level of
interdependence.

Similarly, muscovado millers operate in isolation which to a significant extent widens the gap
between the small scale and large scale producers both in terms of quality and market penetration/
market share. Despite the formation of the Negros muscovado association, there is a lack of
‘tangibility’ of benefits associated with getting firms to lower their guard against transfers to other
enterprises and collaboration with each other.

4. Weak supply chain governance

There is a prevalent lack of common understanding of standards and shared responsibility between
and among players which result to costly non-value added steps such as inspection, return of rejects,
and delays in production schedule. Quality perceptions are different among players in the market.
While price information is widely available and efficiently transferred, the flow of other product
information (i.e., quality and quantity specifications) is not as transparent.

5. Lack of awareness on muscovado among consumers/ No sustained promo and market development

Although muscovado is now available in many of the leading supermarkets, there is still a low
effective demand for the product. People are generally not aware on the health benefits of muscovado.
Likewise, the image of muscovado as “dirty” (due to poor processing) still persist in the minds of
many consumers. Another factor also that affects commercial viability of muscovado is the presence
of cheaper substitutes. There is also a lack of solid market information as basis in crafting a marketing
strategy.

6. Limited understanding and application of Corporate Social Responsibility (CSR)

There is a lack of know-how among muscovado mills on how to implement CSR as a tool to facilitate
business growth/market development especially for products such as muscovado and, in parallel,
provide more equitable returns to sugar cane farmers and workers.

Identification and Presentation of Constraints and Opportunities: Negros Muscovado Stakeholders Workshop.
Nov. 2009. Bacolod City

62
 SECTION 8:
UPGRADING STRATEGIES/INTERVENTIONS

Efficiencies at every step of the value chain will be a critical factor in the sustainable growth of the
Negros muscovado industry. Strategic relationships among growers, millers, distributors and retailers
will be keys to success. To maintain or improve one’s market position, the industry needs to:

- Increase the efficiency of internal processes such that these can be significantly better than
competitors. This will involve integrated actions both within individual links in the chain and
between the links in the chain.

- Introduce differentiated products or improve product quality faster than competitors. This will
involve changing and upgrading of farming and milling technologies and practices both within
individual links in the value chain and in the relationships between different chain links.

- Improve economies of scale through inter-firm cooperation

- Conduct a unified marketing campaign which will also involve the development and promotion
of specific image and set of product differentiation factors that the Negros muscovado industry
as a whole can introduce and sustain as a marketing proposal.

Below are the specific proposed interventions:

1. Strengthening and/or establishment of sugar cane nurseries

Good quality planting materials are particularly important for resource poor farmers since a
significant contribution to productivity can often be gained solely from the planting material used,
independent of other inputs. The genetic potential of a planting material largely dictates crop yields
and the productivity of other agricultural inputs and cultural practices. Farmer-based/community-
based nursery with strong collaboration with the relevant sugar agencies is the most appropriate
strategy for developing effective sugar cane planting material system in Negros. Advantages of
farmer-based nurseries include its simplicity, accessibility, and cost-effectiveness.

This will involve the identification and production of outstanding varieties with a self-detrashing
capacity, drought resistance, ratooning capacity, adaptability to low fertility soils, biological nitrogen
fixation (BNF) potential, lodging resistance and provision of high tonnage and high sucrose content.
Capacity building of cooperatives and farmer groups should be directed towards increasing their
technical and business skills. It is also proposed to utilize and strengthen the inherent dexterity of
women thereby making them active participants in nursery enterprise ventures. Organizational
development support should also be provided to nurseries to: a) instil a conscious application of
business principles in the pursuit of social impact objectives; b) improve competence to develop
market driven, socially responsive and financially viable business strategies, and c) stimulate
standardization of processes and implement simple management systems. It would also contribute to
the success of the CARP if capacities of nurseries to deliver embedded technical assistance to their
clients particularly new ARBs will be developed.

2. Expansion of pool of community-based trainors on GAP aligned sugar cane farming

Building on the initiatives of ICCO/Kerk en Actie organizations, it is proposed that these

organizations in collaboration with relevant government and sugar organizations to build up
indigenous capacity (within the locality) to delivery training on GAP aligned sugar cane farming
rather than delivering the services themselves to each of the farmers. Proposed activities include the
following:

63
 - Participatory updating and customization of sugarcane GAP manual and prioritization
of practices crucial to improving production in the area based on rapid assessment
- Training of community-based trainors on GAP aligned sugar cane farming + on-the-job
coaching
- Production of training materials and visual aids
- Assistance in development and implementation of delivery and financial viability
schemes including exploration of possible scheme anchored on PhP 2.00 lien
- Support set-up of GAP-aligned sugar cane demonstration farms
- Conduct of promotional campaign on GAP and providers

The “good enough” approach to GAP or GAP aligned sugar cane farming involves promoting feasible
upgrades and incremental improvements in agricultural practices that will result in the largest possible
increases in yields and profits. This approach entails encouraging incremental adoption of improved
practices and not overwhelming farmers with significant, dramatic changes to their practices all at
once. For the sugar cane farmers in Negros, “good enough GAP” would mean: a) seeing issues such
as quality and productivity as a continuum, rather than an either/or condition; b) promoting small,
incremental improvements (in food safety, quality, and productivity) rather than large leaps; c)
focusing on small, doable aspects of good agricultural practices, rather than on certification; d)
collectively defining good practices by using input from all players, rather than using outside criteria;
and e) identifying the motives of value chain actors to improve productivity and quality (e.g., to
increase profits), rather than promoting GAP for its own sake.

Business management must be integrated into every training modules. When farmers understand the
benefits of having a productive and profitable farm, they are more likely to look after their crop
efficiently, and more likely to adjust their input use with the changes in costs.

It may also be possible to seek the support of mills (both conventional sugar and muscovado) in the
upgrading of their farmer-suppliers. The promise of having more cane supply and better quality cane
which translate to increase mill profits may be sufficient incentives for them to invest in the upgrading
of their suppliers.

3. Promotion of collective farming and marketing among ARBs

For small farmers/ARBs, the operating principle is not necessarily to be big, but to look and act big
through collective production and marketing, obtaining the efficiency and market access benefits of
size. Small and mid-size producers may be able to capture the access and cost advantages of larger
producers by behaving as one synergistic production unit. Coordinated and collective sugar cane
farming is one of the alternatives. In collective farming, multiple entities form a coalition or alliance
to develop a "better" system of production, which may reduce costs, improve quality, improve market
access, help obtain scale economies, share risk, obtain more information, or obtain better access to
technology. Collective farming would offer the opportunities to share learning and to reduce cost of
transaction that would not be achievable as individuals. Collective farming offers the advantages of
economies of scale and leveraging to obtain big capital. The bulk purchase of inputs means lower
costs, while selling in bigger volumes allows the coop or association manager to negotiate for better
prices key factors in a coordinated farming include the system design, financing, risk and reward
sharing, and how the system is coordinated among its participants.

4. Assistance to small scale mills in upgrading technology and facilities

This may include the following: a) technical assistance to upgrade technology and production
systems; b) updating of business plans both to guide operations and to facilitate funding assistance
from social enterprise funding agencies/donor agencies; and c) linkages to financial institutions that
offer low interest loans.

Priority areas for technical assistance are the following:

64
 - GMP and HACCP compliance
- Upgrading of muscovado production processes/technology
- Supply Chain Management
- Implementation of Continuous Productivity and Quality Improvement which would also
include standardization of processes and procedures

5. Strengthen capacity of the Negros Muscovado Association to take the lead in the development of
the industry and in improving supply chain governance

The Negros Muscovado Association, under the leadership of Alter Trade and with organizational
development and technical support, can potentially take the lead in the following activities: a)
establishment of quality system infrastructure; b) collective/consolidated marketing; and c) conduct of
unified marketing campaign (see No. 6).

The quality system infrastructure is envisioned to be a set of programs, policies and procedures aimed
at defining, disseminating (info codification), implementing, and monitoring the quality
characteristics and standards of products and processes along the entire supply chain. It will also
include mechanisms to assist players to comply with the standards either through peer learning or
services from stand-alone and value chain-based providers. The system is conceived to be an evolving
one with development guided by market requirements and recognized by the public and private
sectors.

The quality system infrastructure will consist of the following components:

a) Standards harmonization: in collaboration with the different players: growers, traders,

processors, retailers, consumer groups, and government organizations. It would cover the
following dimensions of quality: technical, functional, and service. Standardizing the quality
of muscovado produced by the various mills will make it possible to consolidate production
and marketing to facilitate better market transactions.

b) Capacity and Capability building of Value Chain based BDS Providers: development of
product/service concepts, contents and modules

c) Audit system and schemes: Inspection, control, audit and compliance system including
training of auditors

d) Training, Education, and Mentoring System: to provide the industry players the means to
acquire the necessary skills and knowledge for achievement and compliance of Quality Seal
in a sustainable manner

e) Accreditation/Certification System: Assessment of compliance with the quality seal standards

to provide a formal recognition and, thus, an assurance to consumers that products have met
quality standards of product quality, cleanliness, food safety, business integrity and
efficiency.

f) Advocacy and Monitoring: to ensure that those accredited continue to maintain the standards
embodied by the seal

g) Promotion: to create awareness among consumers on the relevance and meaning of the
quality seal and, consequently, get their support through patronage of accredited players,
which could become motivating forces for players to improve practices. Increased
transactions among value chain players and between players and consumers provide the
incentives for enterprises to reformulate their products and processes following certain social,
health, hygiene, quality, food safety and environmental standards.

65
 h) Development of a marketing campaign anchored on the quality seal with the main objective
of strengthening the opportunities of the players to reach bigger and more lucrative markets.
This may be carried out in collaboration with medium/large distributors such as Sharmila Inc
and Peotraco as well as with NGO-based marketing arm such as UMFI.

6. Conduct of a unified marketing campaign/collective marketing

The unified marketing campaign will involve the development and promotion of specific image and
set of product differentiation factors that the Negros muscovado industry as a whole can introduce and
sustain as a marketing proposal. Marketing support ranging from trade fair participation, selling
missions, brochures, packaging, etc. should be built around the agreed ‘image’ and product
differentiation factors. Likewise a storyline must accompany the products, allowing the consumer to
visualize local farming households and community oriented mills using environmental – friendly and
socially responsible practices. Compliance to these standards may be reflected via a Quality Seal.
The Quality Seal will be a point-of-purchase label or symbol that would communicate to buyers and
consumers that the products are of high quality and have been produced from sustainable and
equitable practices at par with international standards. When buyers opt for these products, a market
incentive is created for enterprises to reformulate their products and processes following agreed
standards. In a way, the program uses the marketplace to promote sustainable and good manufacturing
practices by bringing the issues to the attention of the buyers and then using buyers’ interest to attract
more enterprises to improve operations.

7. Building capacity of mills to implement CSR

It is proposed that capacity building should integrate CSR concepts to promote sustainable creation of
value with triple bottom line dimensions: a) Profit, that will benefit all the players with a focus on
poor/sugar cane smallholders earning more income and their equitable and gainful participation in the
muscovado industry; b) Social, that will promote the inclusivity of the poor to improve living
conditions, and; c) Environment, that will facilitate the development and implementation of sound
strategies and actions towards the conservation of natural resources.

8. Incremental promotion of organic farming starting with gradual shift to organic fertilizer

This recommendation builds on the ongoing initiatives of Alter Trade to promote

ecological/sustainable farming. Activities may include:

a) Organic conversion strategic planning which starts with an organic sugar cane viability
assessment to identify suitable farms and locations as well as facilitate the development of an
organic conversion action plan

b) Intensified promotion and awareness campaign on the benefits of organic sugar cane
production through demo farms. Organic sugar cane farming efforts in the province need to
be documented and promoted aggressively to be able to gain a sufficient supply base that can
be attractive to the rapidly growing domestic or export niche markets.

c) Support the establishment and/or strengthening of community-based production units of

organic fertilizer. This activity is aimed at addressing skill deficiencies to develop, produce,
and deliver fertilizer products, which are profitable to farmers and the production units. Better
alignment of supply of fertilizer to the needs and purchasing capacity of farmers will facilitate
increase in effective demand. The availability and accessibility of quality organic fertilizer
will help improve soil condition as well as protect and conserve the environment parallel to
promoting a growing supply of healthy, safe, and affordable food. Capacity building will be
geared towards helping them produce fertilizer that match agro-ecological zones and cropping
systems managed by female and male sugar cane growers parallel to increasing their

66
productivity, production capacity, and product quality. This will enable them to offer
consistent and reliable supply of alternative fertilizer products of better quality and improved
effectiveness at lesser cost, which will result to lower production costs of sugar cane.
Training and coaching on business management and marketing will assist communities to
improve its internal infrastructure to better serve the clients while ensuring its financial
viability. It is also proposed that farmer groups engaged in organic fertilizer production be
trained to deliver technical assistance to the clients in proper fertilizer use and management
and assist in the set-up of model plots which will be used as a showcase and training venue.

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