1

The Challenges of the

Tobacco Farmers,

Middlemen,

and Trading Centers

in Candon, Ilocos Sur

Nombrado, Peter Paul F.

College of Arts and Sciences

University of the Philippines - Manila

Abstract

The paper aims to determine the challenges of the tobacco farmers, trading centers, and

middlemen in Candon, Ilocos Sur. It aims to determine the causes of vulnerabilities of the

specified actors in the industry. It also aims to determine the areas of improvement that could be

done by the government to the specified actors in the industry in Candon, Ilocos Sur. To meet the

objectives of the study, the researcher gathered relevant material through interviews with the

tobacco farmers, trading center supervisors, and middlemen based in the area. The result

indicated that the causes of vulnerabilities of farmers stem from the lack of a comprehensive land

reform program, the emergence of the Ideological State Apparatus in the form of farmer leaders,

and the lack of participation of farmers in formal organizations. The study also highlighted the

role of contract farming to farmers and trading centers, and the impact to the industry of extra

contractual marketing and the issue of non-payment of farmers in their financial obligations with

the trading centers. The study also underscores the dual role of middlemen as both saviors and

exploiters of the farmers. Finally, the study proposes recommendations through identified

specific government actions which should help improve the state of tobacco industry in the

country.

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Acknowledgement

I want to thank God for everything, for giving me this opportunity to experience life.

I want to thank my family for supporting me. To my parents, particularly my mom for the

constant nagging which somehow motivated me in accomplishing my paper. To my dad, thank

you for supporting me all the way. I love you mom and dad. I want to thank my brother Paulo

and my sister Paola for pushing me to finish my paper. Thank you to Auntie Lag and Uncle

Toton for accompanying me in Ilocos Sur and for your connections.

I want to thank Joy for accompanying me in Ilocos Sur, for letting me stay in your unit to

work on my paper and for giving me tips in writing the paper. To Jegar and Onang for being my

English translators and for helping me find the right words to put in my paper. To my PS198

classmates, for criticizing my paper, especially to Rose Ann. To Joana for constantly reminding

me about my paper. I want to thank my brods and barkada for inspiring me to finish my paper.

I want to thank my professors who have guided me in this journey of producing a seminar

paper, especially to Ma’am Risa and Sir Carl for extending the deadlines and for being

understanding and patient with me.

I want to thank all the people who participated in my study, especially Kuya Ruel and Sir

Jeremiah who have helped me a lot in gathering data.

Thank you everyone. Thank you UP.

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Introduction

The researcher aims to explain in this study the situation of the farmers, the trading

centers, and the middlemen in Candon, Ilocos Sur. The researcher aims to discuss about the

challenges or the issues that cover these two sectors of the industry. The researcher chose

Candon, Ilocos Sur since it is the tobacco capital of the Philippines because of the large number

of tobacco traders in the area. Originally, the researcher was supposed to include the

manufacturing sector of the industry, but the companies refused the request for an interview

because they deem the issues concerning tobacco to be too sensitive. As we all know, tobacco

causes harm to smokers and non-smokers alike. They feared that participating in any interview

would aggravate the situation of the tobacco industry with the health community.

The reason why the researcher chose to investigate on this topic is because of the

vulnerabilities of the farmers, the trading centers, and the middlemen in their relationship with

each other. Another reason why I chose this study is because of the need to update its literature

in the country. Lastly, the members of the industry are threatened of their livelihoods due to the

anti-tobacco campaign blaming tobacco as the leading cause of lung cancer in the world. This

implies that members of the industry are being oppressed in the community and are in need of

protection.

It is important to investigate on this topic since it significantly covers the backbone of the

tobacco industry, which is the farmers. It also includes the complex relationship of the farmers

with the trading centers and the middlemen. It also emphasizes on how farmers are exploited in

these relationships and the ways to avoid or lessen the abuses of farmers. The study also

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underscores the importance of the role of government in leading the development of the tobacco

industry.

The researcher makes use of two perspectives in this study. The first perspective the

researcher uses is the Incentive theory of motivation. This particular theory suggests that our

actions are motivated by external desires or incentives such as money or recognition.

"According to this view, people are pulled toward behaviors that offer positive incentives

and pushed away from behaviors associated with negative incentives. In other words, differences

in behavior from one person to another or from one situation to another can be traced to the

incentives available and the value a person places on those incentives at the time."

(Bernstein, 2011)

According to Kendra Cherry, there are three important observations about the incentive

theory: first, incentives can be used to people to engage in a particular behavior but it also can be

used to stop people from performing certain actions, second, incentives only become powerful

when people place importance on the reward, and third, rewards have to be obtainable in order to

be motivating.

The second perspective used by the researcher is Marxism. It is a perspective composed

of many other sub-perspectives. There usually is an agreement for the need to construct a critique

of the Capitalist society, but many writers have disagreements within this perspective. We can

summarize some of the main Marxist ideas by the following terms:

Marxism focuses on the idea that social life is based on “conflicts of interest”. The most

fundamental and important of these interests is between the Burgeoisie (those who own and

control the means of production in society) and the Proletariat (those who supply labor power in

the Capitalist society).

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The concept of social class is more than a descriptive category, unlike the Functionalist

version of Structuralist sociology. It is used to explain how and why societies change. Class

conflict represents a process of change brought about by the opposition of classes.

The Marxist theory has a concern which is two-fold: first, it exposes the political and

economic contradictions of a Capitalist society, second, it points the way towards the

establishment of a Communist society.

Marxists use the concept of hegemony, which is “leadership with consent of the led”.

According to a Marxist such as Althusser, there are two ways in which the ruling class can

consolidate hegemony, and that is through: the use of force such as the police and the army

(Repressive State Apparatus), and the use of ideology/socialization such as churches and schools

(Ideological State Apparatus).

Some Marxists use the concept of false consciousness wherein a Proletariat is co-opted to

the values of a Capitalist society. This is a situation wherein a member of the working class fails

to see himself as a member of that oppressed class.

The overall methodological approach for investigating the research problem is

qualitative. The researcher made use of a specific qualitative approach which is case study. The

researcher believes that the research method, which is interview, has a clear connection with the

research problem. That the method will actually address the research problem. The researcher

intends to analyze the results by using the Incentive theory of motivation and the Marxist

perspective to explain observed behaviors. The study shall only cover farmers, trading centers,

and middlemen based in Candon, Ilocos Sur. Potential limitation that could affect the

researcher’s data collection would be the distrustful nature of the participants due to other people

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who do research for anti-tobacco campaign. The researcher attempts to remedy this through

employing techniques to establish validity such as peer debriefing and prolonged engagement.

This study was conducted in order to determine the challenges of the tobacco farmers,

middlemen, and trading centers in Candon, Ilocos Sur during the school year 2013-2014. It also

determines the causes of vulnerabilities and the areas of improvement which could be done by

the government for the tobacco industry in Candon, Ilocos Sur.

The research will only include the farmers, middlemen, and the trading centers of the

tobacco industry and will not cover the other sectors of the industry which are the distributors,

manufacturers, and the National Tobacco Administration.

Background

Tobacco History

Tobacco is a unique plant for several reasons. First, it has penetrated the economic and

political systems in the country so as to warrant policy considerations as well as legislative

interventions through the years. Second, among the non-food crops, tobacco is the most widely

grown commercially, thus, contributing a sizable amount to the economy. Third, it has spurred

wide scale controversy about its use which, nevertheless, has not decreased but rather has

steadily increased despite the warning that consuming it in any form is dangerous to one's health.

(NTA, 2008)

Finally, while it is pinpointed as cancer causing, it is considered by many as panacea for

many ailments. It may yet be the plant of manifold uses as research continues to discover

industrial and pharmaceutical products from the leaves as well as from its by-products. (NTA,

2008)

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For four decades now, tobacco continues to dominate the agricultural, economic, social

and political life in the regions growing it. The tobacco industry is a major force in the

development of these areas especially Region I where the flue-cured or Virginia tobacco is

grown. (NTA, 2008)

The tobacco monopoly

Tobacco as smoke and snuff became very popular to the Spaniards, other foreigners in

the Philippines and Filipinos alike but the colonial government only learned to exploit its

popularity in the latter part of the 18th century. The actual establishment of the Tobacco

Monopoly in 1782 came only after considerable prodding from the metropolitan government. It

was an answer for the need to raise money to defend the island from Muslim warriors who lived

in the unconquered part of the Philippines. (NTA, 2008)

The Filipinos, especially those in the Ilocos Region and in Cagayan Valley, were forced

to plant tobacco. Each farmer had a quota to produce. At the start, the farmer were treated fairly

and got the right price for their produce. But in the end, the Filipinos abhorred tobacco not

because of the difficulty in growing it but due to the abuses committed by the Spaniards as they

forced the Filipinos to grow this crop. The tobacco monopoly was a source of misunderstanding

even at the start. Initially, the scope of the monopoly's operations was limited to Manila and the

eight central provinces of Luzon, namely, Tondo, Cavite, Bantangas, Tayabas, Laguna,

Pampanga, Bataan and Bulacan. (NTA, 2008)

A collector was contracted to collect the leaves from all the tobacco areas. In effect, these

collectors served as middlemen between the government and the farmers, so the difference

between what the government gave them to pay the farmers and what they actually paid the

farmers was theirs. The collection of leaves was placed under direct government administration

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after many complaints. This gave the farmers better terms like fair treatment and the correct

prices. (NTA, 2008)

The monopoly heightened the exploitation of the Filipinos under the pretext of religion

and obedience to the Spanish crown as it also aroused hostility among the people. Since the

monopoly created many problems among the Spanish officials and the people, there were

proposals to abolish it and let the Filipinos pay double tribute. There could be alternative crops to

grow and the hatred toward the Spaniards could be lessened. (NTA, 2008)

Tobacco types grown

During the 100-year regime of the tobacco monopoly, the country grew sun-cured and

air-cured wrapper in addition to filler tobacco. New cigar types, especially from seeds

originating from the United States and the Netherlands East Indies, were introduced and grown

successfully. Other tobacco types, especially for the manufacture of cigarettes, were grown from

seeds produced in the United States, Turkey, and Russia (Foreign Agricultural Report, 1952).

In 1927, the Virginia or flue-cured tobacco was test-planted at the Ilagan Agricultural

Station in Isabela for adaptability to soil and climate conditions (Rabe, 1983).

In 1942, Japan sent a team to analyze the soil, climate, rainfall and weather conditions in

La Union, one of the four Ilocos provinces in northwestern Luzon, for potential tobacco growing

areas with the hope that the Philippines would eventually become one of its territories.

The team found the conditions in La Union similar to the areas planted to flue-cured tobacco in

Japan. (Duldulao, 1985)

During World War II, the Japanese grew small quantities of flue-cured tobacco from

seeds produced in Japan and Formosa, now Taiwan. The best flue-cured tobacco ever produced

commercially in the Philippines was grown during the 1949-1950 season. Attempts to grow

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Burley were not yet successful. However, small quantities of this type and Oriental tobacco were

already tried.

The need to grow tobacco

Tobacco has always been of great importance to the economy of the Philippines. The

pattern of the country's tobacco industry since the outbreak of World War II changed

tremendously with exports greatly reduced and imports increasing greatly.

The Philippines exported 3,674,136 kg. of unmanufactured tobacco in 1950 compared to

the pre-war years' (1935-1949) annual average of 16,919,169 kg. The same is true with cigar

with an all time low export of 2.1 million pieces in 1950 compared with the pre-war average of

202 million pieces. Only 14,000 pieces of cigarettes were exported in 1950 compared to 37.3

million in pre-war years. The reduction in exports was attributed mainly to the closing of

European markets during the war, the shift in consumer preference from cigar to cigarettes and

the shortage of foreign exchange. (Food Agriculture Report, 1952).

Before World War II, the Philippines exported unmanufactured tobacco mainly to Spain,

the Netherlands, Italy, Korea and Japan. Some shipments were also made to French Africa, the

United States, China, Belgium and the French East Indies. The United States, on the other hand,

was the only source of blending tobacco for the country's cigarette factories.

Manila was the center of the tobacco manufacturing industry in the Philippines. In June

1951, there were 51 government-licensed cigarette factories, ten of which produced 75% of the

country's machine-made cigarettes. The 25% were provided by a licensed factory in Cebu and

many secretly operating factories scattered throughout the country.

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The cigar products were mostly man-made but were considered of excellent quality. The

chewing and smoking tobacco products were substantial while snuff tobacco was insignificant

(Foreign Agriculture Report, 1952).

In 1952, Republic Act 698 was enacted to limit the importation of Virginia tobacco. This

allowed all locally grown and produced Virginia tobacco to be purchased by the government. It

also fixed the price for both flue-cured and sun-dried Virginia leaf tobacco. The Philippine

Tobacco administration (PTA) was mandated to assist the Agricultural Credit Cooperative and

Financing Administration (ACCFA) in purchasing the leaves.

Harry Stonehill, a retired United States Army Lieutenant, brought in tobacco seeds from

America. He printed manuals on how to flue-cure tobacco leaves, and, together with the seeds,

distributed them free to the farmers of Ilocos Sur, Abra and Ilocos Norte. He built flue-curing

barns in Agoo and San Juan, La Union and in Sta. Barbara, and Jan Jacinto, Pangasinan. He

established the Philippine Tobacco Flue-Curing and Redrying Corporation (PTFCRC). Together

with John Witney, a tobacco expert, and Peter Lim, a businessman, Stonehill pioneered in the

Virginia tobacco industry (Duldulao, 1985).

Farming profile

In Region 1, farmers in the area, whether cultivating tobacco or not, can be characterized

as: a) male; b) generally young at age of 21-60 years old; c) had secondary education; d)

household size of 3-5; e) small farm size, 1 hectare or less; f) had more than 10 years farming

experience; g) high tenancy rate (60% for tobacco farmers and 40% for non-tobacco farmers; and

h) total annual income of less than P 100,000.00 (US$ 2,222.22). (Espino et al., 2009)

Tobacco and non-tobacco farmers gave similar reasons for cultivating their respective

crops such as: a) profitability; b) availability of market/buyer; c) accessibility/availability of

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inputs and labor; d) availability and familiarity of production technology; and e) suitability of the

area/climate. (Espino et al., 2009)

The majority of the tobacco farmer (86.8%) will continue to grow tobacco in the next

cropping season due to: a) its profitability; b) available market/buyer and c) experience in

growing the crop. For the non-tobacco farmers, they will continue growing similar crop due to:

a) less labor requirement; b) lower input cost; and c) experience in growing the said crop.

(Espino et al., 2009)

Industry Performance

For trading year 2012, a total of 64,777,824.95 kilos of locally grown leaf tobacco, with a

farm-gate value of PhP 4,625,085,545.70 was recorded as accepted/purchased by the 55 NTA-

registered trading centers and which is summarized below.

TOBACCO TYPE KILOS VALUE (PhP) %VOLUME

Virginia leaf 40,480,712.30 2,989,963,631.79 62.49

Burley leaf 12,545,275.00 959,461,142.83 19.37

Native/ Dark leaf 11,751,837.65 675,660,771.06 18.14

TOTAL 64,777,824.95 4,625,085,545.70 100.00

Source: Regulation Department

Number of Tobacco Farmers and Areas (2011-2012)

TOBACCO TYPE 2011 2012 %INC/DEC

No. of FCs Area (ha) No. of FCs Area (ha) FCs (ha)

Virginia Tobacco 26,839 20,794.32 27,858 21,317.02

Burley Tobacco 14,426 9,383.74 10,944 6,969.63

Native Tobacco 14,268 8,096.72 13,142 7,443.39

GRAND TOTAL 55,533 38,274.78 51,944 35,730.04

*As of Feb. 2013

Tobacco Production (2010-2012)

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TOBAC

CO

TYPE

2010 2011 2012

Volume

(kg)

Value (PhP) Volume

(kg)

Value (PhP) Volume

(kg)

Value (PhP)

Virginia 42,446,39

8.50

2,909,924,38

5.00

44,925,10

5.80

3,163,778,27

1.85

40,480,71

2.30

2,989,963,63

1.79

Burley 19,817,16

0.80

1,329,350,55

8.81

18,671,24

2.70

1,291,902,66

5.40

12,545,27

5.00

959,461,142.

83

Native 11,503,78

5.28

607,113,040.

42

15,732,74

5.41

821,575,424.

81

11,751,83

7.65

675,660,771.

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TOTAL 73,767,34

4.58

4,846,387,98

4.81

79,329,09

3.91

5,277,256,36

2.06

64,777,82

4.95

4,625,085,54

5.70

Source: Regulation Department

Tobacco Exports (2010-2012)

TOBACCO

TYPE

2010 2011 2012

Volume

(kg)

Value

(US$)

Volume

(kg)

Value

(US$)

Volume

(kg)

Value

(US$)

Unmanufacture

d

33,451,89

0

105,607,41

9

42,915,21

0

122,807,46

5

46,421,61

6

132,332,73

5

Manufactured 23,492,80

1

161,159,44

2

28,571,60

1

216,389,31

2

27,270,09

5

209,302,54

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Source: NSO 2009-10 & NTA Reg. Dept for 2011

Tobacco Imports (2010-2012)

TOBACCO

TYPE

2010 2011 2012

Volume

(kg)

Value

(US$)

Volume

(kg)

Value

(US$)

Volume

(kg)

Value

(US$)

Unmanufacture

d

73,222,00

4

293,082,28

8

94,184,65

3

348,225,65

5

88,220,79

4

335,354,06

9

Manufactured 23,492,80

1

12,942,249 1,948,519 16,121,593 2,271,088 19,750,976

Source: NTA Regulation Department

Taxes, Duties, and Other Fees Collected on Tobacco and Tobacco Products

(2010-2012)(In PhP Billions)

YEAR EXCISE

TAXES

DUTIES, VAT,

INSPECTION,

MONITORING

AND OTHER

FEES

CORPORATE

TAXES

GRAND

TOTAL

2010 31.506 2.42 5.09 39.02

2011 25.504 1.55 4.06 31.11

2012 32.181

Source: NSO, NTA

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The following are the minimum floor prices of each type of tobacco for trading year 2014-2015

TOBACCO TYPES (CY 2014-2015)

GRADE VIRGINIA GRADE BURLEY GRADE NATIVE

AA 78.00 HIGH 66.00

A 75.00 A 61.00 M-1 56.00

B 73.00 B 59.00 M-2 46.00

C 71.00 C 53.00 L-1 38.00

D 66.00 D 45.00 L-2 26.00

E 65.00 E 44.00

F-1 59.00 FF 37.00

F-2 56.00

R 46.00 R 28.00

Estimated Employment and Dependents on the Tobacco Industry – CY 2011

Particulars Total

1. At the Production Level (Regions 1

and 2)

840,415

2. At the Trading/Buying Level 32,100

3. At the Local Cigarette Manufacturer/

Cigar Maker Level 7,650

4. At Local Marketing Level 2,103,010

5. Government Sector 1,865

Total 2,985,040

Source: MRDD-NTA

Data and Analysis

In order to determine the challenges of the tobacco farmers, trading centers, and

middlemen in Candon, Ilocos Sur, the researcher interviewed informants which compose of the

farmers, supervisors in the trading centers and the middlemen, which are all based in Candon,

Ilocos Sur.

The researcher collected background information on the farmers which include their age,

income, farm size, and rent if they have landlords.

Name Age Farm Size Income per season Rent

Mario Gamilde 37 ½ ha P30, 000 P10, 000

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Santiago Gaoat 45 ½ ha P30, 000 P10, 000

Jimmy Pascua 49 1 ha P60, 000 P12, 000

Josephine Pascua 48 1 ha P60, 000 P12, 000

Consuelo Gacillan, Jr. 63 ½ ha P40, 000 _

Rosario Gacillan 62 ½ ha P40, 000 _

Sixto Gaoat 74 ½ ha P40, 000 P3, 000

Mackel Gaoat 43 ½ ha P20, 000 _

Dino Garcia 29 ¼ ha P40, 000 P10, 000

Arnulfo Cortez 39 1 ha P100, 000 P5, 000

Catalino Gaoat 39 ¼ ha P20, 000 P10, 000

Jimmy Gaoat 48 ½ ha P20, 000 P7, 000

Roman Gaoat 52 ¼ ha P20, 000 P10, 000

Francisco Gaoat 54 ¼ ha P20, 000 P7, 000

Ruel Alvaro 30 4 ha P30, 000 _

Marcelo Gagarin 55 2 ha P30, 000 _

The study is a descriptive analysis of the tobacco industry in Candon, Ilocos Sur.

Through interviews with key informants, the study covers the causes of vulnerabilities that

impact the tobacco industry. It also informs us of the areas of improvement that could be done by

the government for the tobacco industry in Candon, Ilocos Sur. The researcher will divide the

discussion into three parts which compose the farmers, the trading centers and the middlemen.

The Farmers

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Tobacco farming has been practiced for centuries in the Philippines, and it is evident that

farmers will continue farming tobacco primarily because of its profitability. That is why tobacco

farming is passed on from generation to generation of farmers. Other reasons of farmers for

planting tobacco are availability of buyers, availability of inputs and labor, availability and

familiarity of production technology, and suitability of the area and climate. One of the tobacco

farmers interviewed even said that, “Sa tabako lang talaga kami kumikita.” This attitude of the

farmers can be explained by the Incentive Theory of Motivation. This theory explains that we are

pulled into action by external forces, such as money, to motivate us to act on things we might

otherwise avoid, such as the laborious task of planting tobacco. This particular finding is

important because it tells us why farmers plant tobacco, and why they continue doing so.

Most of the farmers do not have land of their own for farming tobacco. They rely on their

landlords for rent which usually covers one-fourth to one-fifth of their gross income per season.

It is surprising to hear from them that they all agree with this kind of arrangement, and that they

see no problem with it. The farmers said that as long as they provide the amount they agreed

with the landlords, then there will be no problem. The researcher finds this alarming because this

situation can be identified as false consciousness in Marxism. This concept explains how the

Proletariat is co-opted by a ruling class into the values of a Capitalist society. It is a condition

wherein a member of the working class fails to see himself as a member of the exploited,

oppressed class.

All of the farmers interviewed engage in contract farming with Universal Leaf

Philippines, Inc. (ULPI). These farmers were endorsed by a farmer leader assigned by the trading

center whose duty is to recruit more farmers into entering contract farming with the trading

center and to gather farmers for workshops or meetings arranged by the trading center. The

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farmers trust and respect their farmer leaders because they believe in them and they believe that

the trading center will help them in their livelihood. The researcher applies the concept of

hegemony in Marxism wherein a ruling class can consolidate its power over the working class

through the Ideological State Apparatuses (ISA’s). In this case, the ruling class is the trading

center because it is invariably more powerful than the farmers, and the working class would be

the farmers. The ISA’s are the farmer leaders who would be soft-policing the farmers through

ideology and socialization. It is important to identify ISA’s because their role is to uphold the

ruling ideology, which is the ideology of the ruling class. And by understanding their ideology,

we can compare the interests of the trading center and the farmers, and finally, identify the

vulnerabilities of both parties, especially the farmers.

Only three out of sixteen farmers interviewed belong in an organization. It is interesting

to study why only few of the farmers choose to join an organization. These farmers exhibit

similar characteristics. They are the farmers who had usually received tertiary education. They

also possessed their own land for farming. They have larger farms and larger gross farm income.

They are also more active in the community compared to the other farmers. They are either

farmer leaders (in contract farming) or officials in the barangay. These findings are somewhat

similar to an article made by Chanoch Jacobsen (1969) which reviews the differences between

farmers who join general farm organizations and those who do not. He explained that farmers

who join organizations are more involved in farming, they perceive relevant needs, and they

anticipate success. Farmers who are more involved in farming possesses larger farm size, larger

income, and those who work rarely off the farm. Farmers who perceive relevant needs are those

who join organizations which cater to needs that they cannot satisfy by themselves. And farmers

who anticipate success in joining organizations feel more confident that they will succeed

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through the help of organizations. The characteristics of farmers who join organizations and the

factors which describe why farmers join them are important because these can improve the

situation of the farmers in dealing with issues in the industry through the help of organizations.

All of the interviewed farmers were not expecting much from the government. They

deemed the government officials to be corrupt, specifically the local government units, as they

have pocketed the funds which were supposed to be appropriated for the farmers in accordance

to RA7171. This was particularly observed by the farmers and was supported by certain

government officials in the agricultural sector. Even though the farmers felt this way towards the

government, they strongly patronized projects by the government such as the distribution of

water pumps and the “buy 1, take 1 fertilizer” projects, and even demanded their return.

Trading Centers

To support the farming costs of planting tobacco, most farmers resort in making contracts

with the trading centers. The trading center basically highlights the importance of contract

farming and the role it plays for the tobacco farmers and the trading centers. The arrangement

becomes attractive to many farmers because it offers an assured market and provides an access

for production support in terms of funding and farming inputs. It is also of interest to trading

centers as a means of obtaining supply of products for sale or processing. According to the

supervisors interviewed, majority of the farmers in Candon, Ilocos Sur entered contract farming.

And all farmers interviewed engaged in contract farming with ULPI as the trading center. Since

contract farming is becoming more and more popular with the tobacco farmers, this underscores

the overall dependence of the farmers with the trading centers as the farmers rely on them for

technical, financial, and material support. This could result to the abuse of power or breach of

contract by the stronger bargaining party in contractual execution which is the trading center.

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This finding is important because it emphasizes the need to protect farmers from risks which

emerge from the arrangements between the farmers and the trading centers.

As with any contract, there are risks that come from contract farming. One of the risks

mentioned by the supervisors involves farmers selling to a buyer other than the one with whom

they hold a contract. This is known as side-selling, extra contractual marketing, or in the

Philippines, popularly known as “pole-vaulting”. According to Fernando Betonio, Sr., from

FedCo, although pole-vaulting seems legal, it has actually brought problems to the agricultural

industry in so many ways. This has caused farmers to eventually lose their contracts from trading

centers. This has been particularly prevalent in the banana industry. According to the tobacco

farmers interviewed, only one out of sixteen farmers engaged in pole-vaulting. This finding does

not necessarily pose a threat to the tobacco industry in Candon, Ilocos Sur. The trading center

(ULPI, where all the farmers interviewed engaged in contract farming) has devised of a plan of

eliminating other buyers or middlemen in the area by absorbing them in the company. This plan

comes in two phases. The first phase involves the absorption of middlemen into the trading

centers by making them agents and providing them with capital for the assistance they offer to

the farmers. The second phase is the transition phase wherein all agents will be removed to

coerce all the farmers to engage solely to the trading center. This will allow the trading center to

monopolize all the volumes produced by the farmers. This, however, does not prevent other

farmers from engaging in transactions with other trading centers.

The other issue raised by the supervisors regarding contract farming was the non-

payment of farmers in their financial obligations with the trading center. The supervisors claimed

that this causes the trading center to lose money, although, they did not specify how much. For

the supervisors, they consider this issue as a serious threat to their company. Cases of non-

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payment are not that common among farmers, and the researcher believes this has little effect on

the operations of the trading center. Tobacco farmers earn in pesos while trading centers export

abroad and earn in dollars. Surely, trading centers will not go bankrupt because of non-payment

of farmers. This issue does not necessarily impact the tobacco industry in Candon, Ilocos Sur.

The supervisors interviewed shared that the government should focus on directly helping

the farmers by providing them support through access to cheaper fertilizers, irrigation, materials

construction of barns and other machineries, as well as housing projects. Although their concern

was more for the farmers, they also demanded to reduce export taxes for the trading centers.

Middlemen

Middlemen are usually portrayed as parasites, placing themselves between consumers

and producers without net value being created, but for the farmers in Candon, Ilocos Sur, they

are considered saviors. The role of middlemen or “cowboys” in the area is not only limited to

providing cash for the agricultural needs of the farmers, but it also covers costs for household

needs such as rice, and medicine, and even provides for money in gambling such as playing

“tong-its” or “sabong”.

Farmers particularly like making transactions with cowboys because it is quick and easy,

unlike with the trading centers wherein they have to go through the necessary papers and

processes. The researcher applies in this case the concept of false consciousness in Marxism.

Similar to the case of the landlords and the farmers, the farmers, again, fail to identify

themselves as members of the oppressed class. They fail to see that they are being exploited

when they are denied of the necessary documents in making transactions with cowboys. These

documents protect the interests of the farmers as they underscore transparency and accountability

in trade, but they are deemed inconvenient and unnecessary.

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Another cause of exploitation popularized by the cowboys is their use of the old Romana

or the “bitay”. This old equipment serves as a weighing scale for the produce which is suspended

just below the ceiling. Cowboys use this as a tool for exploitation by manipulating the scales to

gather a larger volume of tobacco with lesser weight. Farmers have no choice but to believe the

measurements they get from the scale and they never question it. Middlemen are known to buy

cheap and sell dear. So, farmers are not only taken advantage of their inexpensive produce, but

they also become victims of this cheap racket devised by the cowboys.

In grading tobacco, cowboys use the method of “partida” wherein they offer the farmers

an average price for all grades of their tobacco produce. Cowboys have no training in grading

tobacco, unlike professional graders who are trained for four years to master grading tobacco.

Without formal training, it is assumed that cowboys are not knowledgeable enough in this field

and are, therefore, not credible in grading tobacco. This arrangement gives cowboys an

opportunity to exploit farmers by making use of informal methods such as “partida”. If farmers

allow the cowboys to grade their produce this way, they expose themselves to exploitation by the

hands of the abusive cowboys.

The researcher found it interesting how both middlemen responded to government

intervention. One was indifferent and had no opinion of what the government could offer. The

other participant downright rejected government intervention and reasoned that taxes which

should be appropriated for the farmers were not felt anyway. He also pointed out that funds used

by the farmers come from the private sector and not from the government. These findings

underscore how irrelevant the government is to middlemen.

Conclusion

21

The researcher first identified the need to establish why the industry is thriving despite

the many complications that arise from the different sectors in the industry particularly the

farmers. Even with the astounding disapproval of the health community, the industry remains

resilient in preserving its commerce for as long as tobacco is patronized by its consumers around

the world. This is explained by the researcher with the use of the Incentive Theory of Motivation

in the case of farmers by emphasizing the role of reward, particularly money, in choosing which

crop to plant and why they continue planting this crop.

Marxism proves to be the appropriate theoretical perspective when discussing about the

situation of the farmers, and their relationships with the trading centers and the middlemen. To

discuss the situation of the farmers, the researcher identified the causes of vulnerabilities of the

farmers. The researcher first identified false consciousness in Marxism as prevalent among the

farmers in Candon, Ilocos Sur. This is recognized as a result of a bigger problem faced by the

farmers which is the lack of a genuine comprehensive land reform. The researcher also identified

the Ideological State Apparatus of the ruling class in the form of farmer leaders as

representatives of the trading centers. These ISA’s only serve to protect the interests of the

trading centers and not of the farmers. The researcher also identified that this is further

reinforced by the lack of participation of farmers in formal organizations, which could have

secured and promoted the interests of the farmers.

To discuss the situation of the trading centers, it is not enough to identify the causes of

vulnerabilities of the trading centers. It is also necessary to emphasize the contributions of

contract farming to farmers and trading centers. It is also important to underscore that the total

dependence of farmers in trading centers may lead to abuse of power of the stronger bargaining

party in contracts. It is also observed that there exists extra contractual marketing or pole-

22

vaulting, although not as prevalent when compared to other agricultural industries. The

researcher believes that this has little effect in the tobacco industry. The same goes for the issue

of non-payment of farmers in their financial obligations to the trading centers. Companies need

not worry over the issue, since they earn dollars in exporting tobacco unlike farmers who earn in

pesos.

To discuss the situation of the middlemen, the researcher focused on their relationships

with the farmers and the trading centers. The researcher identified the dual role of cowboys in

the lives of farmers. The cowboys serve both as saviors and as exploiters. They become saviors

when they provide quick and easy cash for the household and agricultural needs of the farmers

which may also include educational expenses for their children. But they also serve as exploiters

when they deny the farmers the opportunity to secure their interests through necessary

documents and processes, when they manipulate the equipment used in weighing tobacco

produce to take advantage of farmers, and when they perform tobacco grading even though they

are not credible graders.

Almost all the farmers, trading center supervisors, and middlemen interviewed in the

study explicitly stated their disdain over the government. They perceive the government to be

incompetent and corrupt, particularly the local government units. Although they recognize the

government in this light, the farmers particularly continue to patronize government projects in

the community such as the distribution of irrigation equipments and access to cheaper fertilizers.

They also hope for the government to provide materials construction of barns and other

machineries, as well as housing projects for the farmers. They also demand to reduce the excise

tax and export tax in tobacco. Although they are frequently frustrated by the performance of the

23

government, they still accept whatever help they can get. This indicates that the industry is in

need of help from the government.

The researcher recommends that in order to address the challenges in tobacco farming in

Candon, Ilocos Sur there should be government consultations that properly address the concerns

not only of the traders but most importantly the farmers who are in the grassroots level. The

researcher recommends that the government continue and improve projects that involve

provision of farming inputs and equipments. The government should ensure that farmers have

access to their own land through a genuine comprehensive land reform. The government should

ensure that farmers’ rights are protected and benefits are given by promoting a system of law,

particularly in the negotiation and drafting of contracts. The researcher recommends the

strengthening of farming organizations and to encourage more farmers in joining organizations

to secure and promote their interests through improving their contract negotiating skills. It is also

important to protect the farmers from risks that may occur from contractual execution, such as

abuse of power by the stronger bargaining party or breach of contract. It is important to follow

the lead of different countries who have enacted policies and legislation to ensure fair contractual

practices and offer remedies for dispute resolution. The researcher recommends that the

government study the “Legal Guide on Contract Farming” which is being developed in 2013-

2014 by the International Institute for the Unification of Private Law (UNIDROIT) in

partnership with Food and Agriculture Organization (FAO). The researcher also recommends

that traders who will be caught manipulating weighing scales should be charged with criminal

offense and must be punished by law. It is also important for the government to regulate the

weighing scales used by traders in weighing tobacco produce and abolish the use of the Old

24

Romana. The researcher also recommends a stricter and more transparent implementation of

policies regarding the revenues appropriated for the farmers such as RA7171.

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