Wednesday, July 29, 2009
Filipinos love coffee, but have you ever wondered what the story is behind that cup of steaming hot java brew you can’t seem to start the day without having? Of late, there seems to have been a renewed boost of sorts for Philippine coffee.
This could be attributed to efforts by various notable personalities and institutions, both in the private and public sectors, but one particular group that has perhaps done more than its share in perking up the coffee industry is the seven-year-old Philippine Coffee Board (PCB).
Early this year, the board was mandated to undertake what looks like a daunting task: to make the country—a net importer of coffee—self-sufficient in the commodity by 2015. The mandate entails, among other tasks, rehabilitating and rejuvenating coffee farms and expanding areas where more coffee can be planted and harvested. To obtain a clearer idea about how it is going about realizing its work, the BusinessMirror invited the board’s key officers to a discussion to gain a clearer idea about the coffee situation and find out how they’re implementing their objectives.
In the discussion were Pacita Juan and Nicholas Matti, PCB cochairmen, and other PCB members, Dr. Alejandro Mojica of the National Coffee Research and Development Center based in Cavite State University, Rene Tongson and Emmanuel Torrejon. Juan, aside from cochairing the board with Matti, is also project director for Pilipinas Gising at Magkape, a project with the Department of Agriculture (DA) which aims to make the country self-sufficient in coffee by 2015; Matti is responsible for rehabilitating, rejuvenating and helping in the expansion of coffee production—the board’s three main program objectives—in the Visayas region; Mojica and Tongson for undertaking the same objectives in South and Central Luzon; and Torrejon, for the Northern Luzon area.
Coffee Discussion Excerpts:
There’s a lot of interest in coffee, if only because a lot of Filipinos, particularly those in the business sector, cannot start their day right without a hot cup of coffee. First, however, can anyone give a background on Philippine coffee?
Pacita Juan: Collectively, around this table, we all would probably have over 50 years experience in Philippine coffee. Mr. Matti probably has the longest experience among us in coffee. If you would like to talk about how coffee beans came to the Philippines, I guess I can defer to Mr. Matti and Dr. Mojica, and after that I will give my part in the value chain, where I have experience.
Dr. Alejandro Mojica: They say coffee came to the Philippines in 1714 and the first area where coffee was planted was in Lipa. That is why when you say coffee, what you’re actually saying is Batangas coffee because that’s the initial source for Philippine coffee. The local industry was first developed in Batangas. They say the first beans came from Spanish friars, but there was a story that it came from a church in Laguna, and when the parish priest there died, an altar boy brought the beans to Lipa. Lipa was where coffee was planted but the first seeds came from Laguna. So you can say that the Philippine coffee industry was first started in 1714, in Batangas.
By 1880, the Philippines was the fourth-largest exporter of coffee in the world. However, that year, a disease infesting coffee worldwide happened. The infestation, coffee rust, affected the country, and Philippine coffee, the production of which was concentrated in Batangas, Laguna and Cavite, was almost totally wiped out. There were pockets in Mindanao, like, for instance, in Sultan Kudarat where a doctor assigned there brought seeds from Cavite and Batangas. Also pockets in the Visayas where the seeds also came from Batangas and Cavite.
Nicholas Matti: As Dr. Mojica stated, the Philippines was No. 4 exporter in the world, but that was mainly in terms of Arabica coffee, in the 1880s. To begin with, there are really about a total of 600 coffee varieties, but only four are commercially viable—Arabica, or what’s called the coffee of commerce since 70 percent of world production is comprised of that kind of coffee; then Robusta, which is second or about 29 percent; and the remaining 1 percent, comprised of Liberica or barako, and Excelsa. Robusta is either a filler of roasted ground coffee or the mainstay of instant coffee.
Then, as Dr. Mojica said, the disease that hit the country was coffee rust. It wasn’t only the Philippines that was hit but also Sri Lanka in Ceylon and Java in Indonesia, among other coffee-producing countries. No one, at that time, knew how to control the disease effectively, thus, it was widespread. And that was also when they found out that Arabica was susceptible to the disease but only at altitudes below 5,000 feet. Between 1880, when there was a boom in Philippine coffee, to the 1990s, a Dark Age descended. In between that period of from 50 to 60 years, there was a replanting of Robusta mainly, and some Liberica or barako. Right after World War II, I think, Commonwealth Foods here already started to produce Philippine coffee, the Café Puro brand. Nestlé came in the 1960s, with instant coffee, and Robusta was the main component of that kind of coffee.
Juan: There was a time during the 1980s when people would go to Angeles and they would buy Taster’s Choice, Folgers and the like from PX stores. These are all the American influence after World War II.
Matti: You should remember that instant coffee became popular as the GIs went all over the country, and they were drinking instant coffee.
Today, where is coffee produced in the Philippines?
Juan: Right now, most of the coffee is grown in Mindanao, but Cavite remains the No. 2 area for where coffee is produced. Volume by province, it’s still Cavite.
Rene Tongson: It’s still on top, because when you say the single-biggest [coffee] producer in terms of province, Cavite leads. Coffee in Cavite is produced in the upland areas, starting somewhere in Silang to Tagaytay, Amadeo, Alfonso. Mendez, Indang, Gen. Emilio Aguinaldo—those are in Cavite’s Third District, or upland areas in the province. Cavite is really an agricultural area and one of the major crops produced there is coffee. They intercrop coffee with cash crops like fruits and vegetables because the problem again with Cavite is that the average landholding for a family is less than 2 hectares. So, again, they have problems with how to negotiate directly because of their volume, but the good thing with Cavite is that in one town alone, there are at least five, six or even up to 10 millers so that in less than 15 minutes, you are in the warehouse. So access is good in Cavite. That’s why the coffee business is maintained in Cavite even today, the downtrend in business notwithstanding.
But commercially, Robusta is the coffee of commerce in the Philippines?
Juan: Let’s put it this way. I’ll give you some bullet points. Of the four varieties, Robusta, Excelsa, Arabica and Liberica which is barako, Arabica grows at higher elevations, like Baguio, which is like 1,500 meters above sea level. At a higher elevation, that’s where you optimize the taste of Arabica. It’s better. In terms of quality, you know, we are the Philippine Coffee Board so every coffee is good for us. We do not say that one is better than the other, but they have their reasons for being.
What is the most expensive among those varieties?
Juan: Expensive can mean many things. It can mean that because Robusta is aplenty, then it could be one reason why it’s lower in price. But Robusta, barako or Liberica, and Excelsa grow on the same elevation. But why is barako more expensive now than Robusta? It all depends really on market demand and personal preference. Because there are some people for example that will say about Arabica—oh, I’m not used to that coffee, I will have to drink 10 cups to get a high. But there are some people naman who will say, I can’t take the Robusta because you might take me to the hospital. So it really varies and it’s really personal. So what do roasters do? They blend.
Currently, is there a Philippine coffee-industry crisis?
Matti: I don’t know if you can really use the term crisis, but it’s like this: Twenty years ago, we were a net exporter of coffee, producing about 70,000 to 72,000 tons and consuming about 35,000 tons. So we had about 35,000 to as much as 40,000 tons for export. But the average in the 1970s and 1980s was about 30,000 tons [for export], with a banner year sometime in 1989 when we exported about P140 million to P150 million worth of coffee. After that, several factors, a major one being in 1990, was the loss in the quota system. We’re still a member of the International Coffee Organization of which there is an international coffee agreement, which sets quotas for export from producing countries and importing into developing countries. We had a quota there and that quota served as a price mechanism, so the average before of coffee prices were about $2,000 to $3,000 a ton. Then sometime in 1989, coffee prices dropped to less than a thousand dollars, so since 1989, 1990, coffee prices have been going down, affecting production.
Here in the Philippines, we were producing about 70,000 tons in 1989 and by 2002, when the Philippine Coffee Board had just been organized, we were down to producing only 23,000 tons. So we lost 50,000 tons. Well, some of the efforts that we’ve done have helped increase production to, as I said, about 30,000 tons now.
Juan: In the country, probably 90 percent of our production is Robusta. Ten percent is between Arabica, barako and Excelsa. When we were in Benguet, the coffee growers there were saying, “Mr. Matti, Benguet used to produce a thousand tons of Arabica,” but now you’d be hard-pressed to find even 200 tons [of that kind of coffee].
Matti: So, what has happened to coffee in the Philippines? As I said, in the country, from 75,000 tons, we hit rock bottom of about 23,000 tons. So we lost 50,000 tons during that period, from 1989 to 2002. In the meantime, our consumption has been going up, from 30,000 tons, we’re at present hitting 60,000 to 65,000 tons already. So we have a shortage today of from 30,000 to 35,000 tons, which we’re importing. So, if you multiply that, let’s say, by an average price of P100—well today, price of Robusta is about P75 to P115—easily, we’re importing P3 billion worth of coffee annually, from Vietnam mostly. We actually hit the P3-billion mark this year. But for the past five years, we’ve been importing coffee valued at not less than P1 billion annually.
How was the Coffee Board organized?
Juan: Let’s go back to 2002. During that time [former Agriculture Secretary Luis] Cito Lorenzo [Jr.], who was Secretary for the Creation of One Million Jobs, was asked by President Gloria Macapagal-Arroyo what his formula was. So he went industry by industry. And then, because he knew Bill Luz, who was then executive director of the Makati Business Club, they got to talk about coffee, because Bill is another coffee lover. And so Bill asked around who he could work with in the coffee industry, and names, including mine and Mr. Matti, Dr. Mojica and [Cavite councilor] Tongson, started to float and he looked for us. And so we were invited to put together a task force for coffee rehabilitation. It was then called the Presidential Task Force on Coffee Rehabilitation under the Office of the President, or more particularly, under then-Secretary Lorenzo’s office. They asked us what the problem was in coffee and so we told them, underproduction, etc. Bill asked me if I could be chairman of the task force and I told him I didn’t know anything about coffee production and I told him, can you look for this person, his name is Nicholas Matti. So, Bill called Nicky and the latter obliged. So were all gathered together and then Cito told us about the program. We got other persons in the coffee trade and we got as advisers Secretary Lorenzo and Cavite Gov. Irineo “Ayong” Maliksi. And so we started, and with Bill Luz, who’s good as a marketing guy also, we started to drum up interest in getting people to know about Philippine coffee.
So it really started with Secretary Lorenzo and Mr. Luz?
Juan: Yes, but before that, we were already holding coffee festivals since October 1997. October because that was the month declared by then-President Fidel V. Ramos as Coffee Month. So from 1997 to 2000, it was already in Ayala but it was then known as Black and White and it was initiated by the Department of Trade and Industry-International Coffee Organization Certifying Agency, Coffee Foundation, etc.
Mojica: For our part in Cavite, we already had the Pahimis Festival. Cavite was the first province affected by the shortfall in coffee production. So in 2001, 2002, we, together with Governor Maliksi, because at that time there were about 10,000 coffee farmers in the province, so Amadeo and us in the academe, what we first thought about was to put up a festival that would interest President Arroyo to look at the coffee industry which, as they put it, was already in the ICU, or a dying industry. So it was Governor Malicsi who invited President Arroyo to the Pahimis Festival in Amadeo in 2002. She went to the festival. The Coffee Rehabilitation Task Force was created when she went to the Pahimis.
Matti: Before holding that Pahimis Festival, Malacañang knew what the exact problem [of coffee] was. Coffee roasters, traders and farmers were losing interest, and it was a matter of timing that the task force was created because the price of coffee was really down, and the [coffee] farmers were in disarray.
Mojica: Also during that time we already had a Cavite Coffee Development Board, which was created through an executive ordinance issued by Governor Maliksi. That was the basis of Malacañang for the Philippine Coffee Board.
But what happened between 2002 and now?
Juan: We wanted to drum up interest on Philippine coffee and a Philippine coffee brand, because during that time also, the international coffee chains started to come in. The industry was going down already, and the coming in of foreign coffee chains worsened the situation for the local industry. Bill Luz and I would come up with a program every October to find coffee enthusiasts, giving samples of locally grown coffee by the hundreds of thousands because we wanted people to taste and see for themselves how good local coffee tastes. And, indeed, people started to realize, that, “Oo nga no, masarap pala ’yung Philippine coffee [oh yes, Philippine coffee does taste good!].”
And it worked?
Juan: I think it did. For instance, Siete Barako said its supermarket sales of coffee increased by 25 percent annually. Take note, this is from Kalinga. It’s Kalinga brew.
In Banawe, people there drink Arabicafe. They created a regional brand. In other words, in Benguet, they have their own branding.
Emmanuel Torrejon: I was in the Cordilleras yesterday, and you know what? The producers there don’t want to sell their beans green; they now want to sell them roasted already. In Sagada, a woman told me, do you know we don’t want to sell our coffee? We even buy.
Matti: That’s value added [when roasted].
Torrejon: The farmers there are already starting to be empowered.
Juan: They don’t want to sell you the green coffee anymore. In the past, roasters like Manny would go up the uplands just to get green coffee from the producers, which they would roast and blend. Now, the coffee farmers want to roast their own coffee themselves, and of course when they sell that, there’s value added to their roasted coffee already.
So does that affect your roasting operations?
Torrejon: Well, not really.
Juan: No naman. His job is to bring Benguet’s coffee farmers’ production up to 1,000 tons. All the roasters are there for harvest.
I understand you’ve divided the country into several areas and assigned a person in charge of each area. Can you explain how that is?
Juan: We’ve been doing two programs. In 2002, we launched the brand Kape Isla, which represents the best coffee in the Philippines. And we put up a coffee shop in Serendra by that name, Kape Isla, which is our umbrella brand for roasted, ground and instant Philippine coffee. Sometime in October 2008, we were called by the Department of Agriculture, which inquired how our coffee industry is. We put together and presented a plan to the DA and they told us, implement it and we will give assistance to the program, which basically is to rehabilitate, rejuvenate and plant new coffee trees. We call this program Pilipinas Gumising at Magkape [PGAM, or Philippines, Rise and Drink Coffee]. It’s literally waking up the farmers. Since the country is divided into 23 coffee-growing areas, it will be a difficult task not to have concentrated people on the area. So we have a core group.
North Luzon or the Arabica area, which is composed of Benguet, the Cordillera mountain range, Mountain Province, Bontoc, Ifugao and Kalinga, is under Manny, who has vast experience in Arabica.
Now Central and South Luzon is a big area also spreading from east Doña Remedios Trinidad [DRT, one big Robusta planting area] in Bulacan west to Bataan, south to Cavite and Bicol. The area of responsibility is under Dr. Mojica and Rene Tongson
Tongson: That’s even down to Virac, Catanduanes.
Juan: We also based it on the amount of coffee production in the area. It would be great than just to map it geographically, but also the amount of coffee production per region, per area. We assigned Mr. Matti near areas in Kanlaon in Negros Occidental, as well as Panay in the Western Visayas area. Then Mindanao we split into two: Southwest and Northeast. That’s why when we divided the area, our first game plan was to go around the country and present the program to our partners.
Who do you work with in the area?
Juan: Partners, nongovernment organizations....
Are you supposed to organize farmers?
Juan: No, they’re organized already. We do not do institutional building. What we do is promote the program. We did partner meetings in South Luzon, Central Luzon and Tagaytay.
How do you have these people?
Juan: They are there already—those in the LGUs [local government units], NGOs, academes and farmer groups. So first, we organized and described the program we went to in Mindanao, the Visayas, Benguet and North Luzon. There was a leveling. We underlined with everybody—this is the program, okay? The program entails agreeing on the number of provinces and towns that you can reach for rehabilitation where you will clean the farms for rejuvenation, cutting the plants so it can sprout again and later on expand the area. The next stage is getting the farmers to actually do it. So we conduct on-the-spot training.
What is your time frame and targets?
Juan: What we want is self-sufficiency in 2015. We have to produce 65, 000 to 75,000 metric tons by that time.
Juan: That is already our (Philippine) consumption, so we don’t need to import.
Torrejon: We’re giving the farmers inputs in order for them to fertilize organic, in my case the CAR region is an organic region. That is the irony, they want organic for coffee and yet for vegetables it’s not. Even my partner in Benguet University, they practice organic agriculture. That’s the challenge, they want to grow the coffee in organic way, which is so expensive to certify. In BSU [Benguet State University] all the production is certified organic. If they want to rejuvenate we give farmers retooling source, small implements. There are some people who are asking if we could give them fencing, barbed wires. These are things that are real. They come out in the meeting asking for barb wires because animals stray into the area. In my area, what we’re trying to espouse there is niche marketing. So organic, we’re trying to teach the farmers fair trade. I said that’s possible, if you want fair-trade coffee, but we have to get organized for that.
What is fair-trade coffee?
Torrejon: Giving a higher price to the farmer and selling that particular coffee to a niche market that buys value-added coffee. People who want to help out the farmers in the US, in the Western countries. By buying that kind of coffee that they produce, you help the farmer, but of course we’re going to make sure that the quality of their coffee is good. Those are the kinds of things that we’re trying to do for the Northern region because for Arabica it’s more niche marketing. They even told me that the Mountain Province governor has promised them funding for a roaster…so I told them, good!
Tongson: In addition to what you’re saying, the coffee farmers are starting to refuse to let go of their beans—they want to do [roast] it on their own, so they’re already value-adding. And that’s good. Because one of the main objectives also of the Coffee Board is to see more jobs and income generated amongst the farmers. We plant more coffee to produce jobs and more income.
Torrejon: Adding to that, I also would like to discuss with the board if it’s possible that we could have a single brand for the whole Cordillera, along with Kape Isla and the Coffee Council. One brand, so you can really push it. I know it’s hard to get all the farmers to agree to this, but it can be done. Because the farmers say that in the program, they will have to pay back, right? With coffee beans. So they were saying, what if we don’t want to sell you our coffee beans because we want to use it ourselves? So I told them, you can sell half of your harvest, and half you use. That’s okay, we can have a half-and-half arrangement. And I told them that if they want to sell the other half to us and have it roasted, we can also do that. They sell us the beans, half we will sell outside and half we will roast for them and we will have a single brand. So that’s empowering them also and maybe that is the start for them to produce more, because they can see the value of their coffee increase, because what they’re coming up with are no longer just merely green beans. If we can just jump-start the production to make it grow because of the roasting, then that would be great.
Juan: Are we giving you a good picture of the program?
Matti: To an outsider to the coffee industry, it seems like we want to do so many things. But that’s not actually the case. The country produces four kinds of coffee and each of these are different from each other in terms of requirements and marketing. For instance, Robusta is volume coffee, I mean, we need 30,000 tons of that overnight if possible. So we have to encourage a massive planting effort for that. Arabica, for its part, is a high-value niche-market product, so the marketing for that is different. And then there’s so many other people who want to get into coffee but their farms are in the lowlands, and when they come to us, we encourage them to plant Liberica [barako] and Excelsa because these can be done in low areas and there is a market for these kinds of coffee.
What are the aggregate values for these kinds of Philippine coffee?
Matti: Right now, good Arabica will fetch you anywhere from P160 to P170, maybe P175 to P180 for really good ones; good Robusta will fetch you anywhere from P75 to P80; good Excelsa would be up to P100 and Liberica up to P120, P125.
Mojica: It gets up to P180 for Liberica. The Japanese market for Liberica is a large volume; Japan would like to import 5 tons a month from Cavite coffee growers but the latter can only give 1.2 tons a year. There’s a sore lack of supply. Canada also is asking for Liberica.
Meanwhile, in our area of responsibility, South and Central Luzon, we have a different case because farmers are more advanced in, say, Cavite, than the rest of the country when it comes to coffee farming. Coffee growers in our area, in South and Central Luzon, they use inorganic fertilizer, chemical fertilizers. There’s going to be a meeting of selected farmers and in the program will be two farmers who will give testimonies that there is still money to be generated in coffee. They will be talking about their positive experiences in coffee farming. We will also be teaching those attending the meeting rehabilitation techniques.
And as far as the demand for barako, first, there is a problem with planting materials, so we are doing R&D in propagating planting materials for barako. Nestlé is already doing the basic research on Robusta. For Arabica, Manny [Torrejon] will be doing the R&D and nursery activities, while Liberica will be our responsibility in Cavite, even as Nestlé does R&D for Robusta.
Matti: If you’re outside of the industry, you’d think there’s a lot that we in the board are taking on and that we’re an ambitious lot, but that’s not true at all. There are four varieties of coffee in the country and each variety has different market demands, different production requirements and so on.
Juan: Since this is a business newspaper, may I suggest that maybe we should appeal to the readers, not only that they drink more coffee but see what the opportunities are in the coffee industry for businessmen? One is they can operate a seedling farm. They can produce planting materials, produce seedlings for coffee. You don’t even need a whole hectare, maybe just 5,000 square meters. Maybe some of your readers might have this kind of property and are looking for ideas how to use it. And there are opportunities in the coffee industry. If you have 5,000 square meters in Tagaytay or wherever, we’ll tell you the key areas. Put nurseries in the following places. Ok, what does it take? What are the initial investments for Robusta? For barako? And for Arabica? We’ll tell you.
Mojica: You need something like P100,000 for a small nursery.
But as of now, what are some of the more problematic challenges faced by the industry?
Juan: There are challenges and there are solutions to these challenges. The challenges are P150 million will not cut and solve everyone’s problems. That is supposed to be our budget, initial budget, to last until 2010. And we’re supposed to reach as many poorest communities as possible that are in coffee. So imagine the matrix again. You want to reach the poorest communities. But you overlay, “Saan dyan may kape?” When you’ve already targeted where the coffee is, you ask, what do the communities who are into coffee need? Do they need help in rehabilitation? These are what we in the board are doing. We are checking each and every site to check what coffee farmers need. And, for the appreciation of the general public, where can they help? Will you just merely drink your cup of coffee?
When did you start?
Matti: We’ve been going around since February of this year. February, March and April was like reconnaissance, data gathering, getting reacquainted again with key people in the industry. Let me try and give you a picture. It’s like this—imagine a war, we’re the Red Cross, we come in, and the first thing we do is we ask, what’s the body count? There was 70,000 production, now, there’s only 30,000. Over 30,000 were killed and 30,000 are still alive. So it’s as if we go to a hospital and then we do triage work. We sort out what the survivors from the devastation need, what aid we can give. What we’re supposed to do is akin to sorting out the casualties and determining what we can do for each—this one needs rehabilitation, this one rejuvenation, this one needs replanting, and so on and so forth.
Is the industry in a mess? Is it in disarray?
Juan: It is in disarray but it can be fixed.
Mojica: From my point of view as a researcher, first, we need to do something about the yield per hectare because we are way behind Vietnam, for example. The national average yield per hectare of Vietnam, which used to be 1.26 metric tons, is now 3 tons! In contrast, the Philippines is averaging only 300 to 400 kilos on average. Cavite is averaging some 700 to 800 kilos. There was a time when Cavite averaged a ton per hectare, but that has gone down. So our goal now is, from a national average yield of 300 kilos per hectare, we would like to see that increased to 800 kilos. If we can only do that, that would be a lot of added value in total production. The problem is that a lot of our coffee trees are old already, and so too are a lot of the country’s coffee farmers. In Cavite for instance, the average age of coffee farmers in the province is 56 years old.
Juan: One of the things we’d like to do is produce a telenovela or a local movie that will be set in a coffee farm, in the hope of encouraging younger people to go into coffee farming. It would be nice to do it in Benguet, which is a beautiful romantic place, so that maybe we can increase Arabica production. And we’ll reach our 1,000 tons through a movie. And people will drink more coffee. And second, in July, we will have a national coffee tree-planting week. This will happen simultaneously in all our five areas of concentration. We will plant coffee trees every July of every year, and in October, we will have our coffee festival where we will no longer promote the brands but the regions that grow coffee like Kibungan, La Libertad, La Castellana and others, so that people will take pride in their region—there will be booths for every area—and you can taste the coffee from across the country, regardless of brand. The festival this October will be held in Manila, and if funds will allow, we will take it to Cebu, to Davao.
Matti: Let me just say one thing in response to the question about what the problems are. There are actually a host of problems, but actually the main problem in coffee is the price. It fluctuates too much. But there’s nothing that the board or any trader can guarantee because we’re already in the world market, so the only way by which we can solve this problem here is to teach our farmers two things: what we lost was brawn and brains. We have to put in brains, we really have to sharpen our pencils on how to compete. That’s really what the board’s bigger challenge is. First, we have to encourage them to plant, but in encouraging them to plant, we have to assure them that they will make money down the road. For my part, I’m bringing in provincial agriculturists from Iloilo, Negros Occidental and Negros Oriental to see firsthand what the survival mode is in Cavite, so that they can go back to their areas and teach what they’ve seen in Cavite to farmers in their own localities.
By Business Mirror
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