Republic of the Philippines

PROVINCE OF MOUNTAIN PROVINCE Bontoc, Mountain Province

PROVINCIAL COMMODITY INVESTMENT PLAN

FOR COFFEE IN MOUNTAIN PROVINCE

PROVINCIAL COMMODITY INVESTMENT PLAN FOR COFFEE IN MOUNTAIN PROVINCE

I. Development Background/Context

Mountain Province is an upland area in the Cordillera

Administrative Region with temperate climate, 83 percent of its

land area having mountainous topography and the remaining 17

percent is rolling to flat terrain. With its mountainous terrain and

temperate climate, it is suitable for highland vegetables (cabbage,

white potato, carrots, sweet peas, cauliflower/broccoli, etc) and

agro-forestry production (Arabica coffee, citrus, etc) traditional and

improved rice varieties in the eastern part of the province. It has

also potentials for hydro power generation, mining, and eco-

tourism development. However, despite these resource potentials,

the province still remains poor as indicated by its poverty incidence

of 47.1 percent in CY 2012. Unemployment rate was also high at

49.0 percent in the same period. This poverty condition could be

traced to the slow pace of economic development in the province

resulting from untapped and/or undeveloped natural resources,

low agricultural productivity coupled with the inaccessibility

problem and remote condition of the area also aggravated by

climate change.

In the agriculture and agri-business sector, most farmers are living

at subsistence level despite the province’s resource potentials.

These farmers are composed of indigenous peoples namely: the

Aplai and Kankanaey tribes of the western municipalities, the

Bontoks of the central towns and Baliwons of the Eastern

municipalities with farming as their major source of

income/livelihood. As identified in the Value Chain Analysis of the

commodities including coffee produced in the province, the

problem confronting most farmers is low crop productivity due to

the following:

(1) High production cost of commodities viz-a-viz low market

prices; (2) Lack/ inadequate production support facilities, such as

the poor road conditions that limit access to production areas

which in effect increase the costs of inputs and hauling cost of

harvest to market; (3) Continuing soil fertility depletion as a result

of continuous use of inorganic fertilizers and topsoil erosion due to

the mountainous terrain; (4) Lack of cooperation/will among the

farmers themselves to institute crop zoning/plantation in order to

stabilize supply and prices of commodities; (5) the lack of post-

harvest, processing, marketing facilities results to crop

losses/spoilage affecting the price and quality of produce. Given

these issues and concerns besetting the farming households,

more farmers are now shifting to work elsewhere such as the local

mines within and outside the province.

II. Development Vision and Framework of the Province The Provincial Development Physical Framework Plan of Mountain

Province envisions “An economically able, healthy and educated

citizenry living in a peaceful orderly and ecologically balanced

environment”.

Aligned with the national and regional development goals, the

provincial development plan aims to reduce poverty, enhance

economic prosperity and environmental management within the

context of balanced and sustainable development. Thus, its

strategic direction is anchored on developing the province’s

comparative advantages and resource potentials for agro-forestry

and highland vegetable production, eco-cultural tourism, mini

hydro power production, and provision of adequate infrastructures

and facilities.

In the agricultural and agribusiness sector, the challenge is to

increase income of farmers through increased market and profit

share of the identified commodities and make Mountain Province

the major producer of quality agro forestry crops (coffee and citrus

fruits) and highland vegetables (cabbage, carrots, potatoes, etc.)

including traditional rice. With the Value Chain approach, and

through PRDP, it hopes to address the issues and concerns

identified per chain or segment of identified commodities with

appropriate interventions from production, processing, marketing

and institutional concerns.

For the Arabica Coffee Industry in Mountain Province, it expects to

accelerate crop productivity, increase production and ensure that

each player of the segment share from coffee earnings/income

through appropriate interventions. The project would likewise

enhance public-private partnership in ensuring that each player of

the segment share from the income derived from the coffee

industry.

III. Priority Commodity Chains Development 1. Commodity Value Chain for Coffee

A. Commodity Profile TECHNICAL DESCRIPTION

The Philippines Recommends on Coffee Production says that

coffee is a beverage crop that grows well at elevations 600 to

2,000 meters above sea level depending on the variety. There

are four (4) commercially cultivated in the Philippines, namely:

Arabica, Liberica, Robusta, and Excelsa.

The Department of Agriculture Regional Field Unit– Cordillera

Region (DARFU_CAR) also documented that the four major

coffee varieties grows well in the region with Robusta variety

registering the highest yield per hectare of 5,117 metric tons

(MT) per year (2008). Arabica coffee variety on the other hand

offers the best quality because of the excellent flavor and aroma

and is also best suited in the highland provinces of the region;

in Benguet, Mountain Province, Ifugao and Kalinga. It is fast

growing and bears fruit within 2 to 3 years after transplanting a

one-year old seedling with an average yield of 536 metric tons

per hectare per year (2008).

Similarly, all the four major coffee varieties are grown in

Mountain Province where Arabica coffee variety is the most

cultivated in the medium to high elevations while the other

varieties: robusta, liberica and excelsa are grown in the

backyards in the low lying areas. The table below shows the

coffee production in Mountain Province.

Table 1.Inventory of Bearing and non-bearing Arabica Coffee trees and Production (metric tons) by municipality in Mountain Province.

MUNICIPALITY

NO. OF EXISTING TREES VARIETIES PLANTED

PRODUCTION VOLUME (kg green beans)

BEARING NON-BEARING

BARLIG 5,396 49,360 Arabica/Robusta 4,319

BAUKO 22,580 23,038 Arabica 15,806

BESAO 16,868 12,640 Arabica 13,494

BONTOC 3,804 3,450 Arabica 3,043

NATONIN 2,187 4,374 Arabica/Robusta 2,624

PARACELIS 2,934 5,868 Robusta/Liberica 3,521

SABANGAN 10,347 13,154 Arabica 8,277

SADANGA 771 2,768 Arabica/Robusta 925

SAGADA 7,699 50,210 Arabica 5,389

TADIAN 21,725 28,898 Arabica 17,380

TOTAL

94,311

193,760

74,778

Data Source: OPAG, Mountain Province

Coffee berries are harvested only once a year from

December to March for all the four varieties being planted.

Lean supply months are from April to November.

The total number of coffee bearing trees is 94,311 with an

average yield of 1.3 kilograms per tree per year while there

are 193,760 non-bearing trees which are expected to bear

fruits after three to four years from now, as reported by the

Office of the Provincial Agriculturist in Mountain Province.

UTILIZATION AND CONSUMPTION As coffee is widely grown in the country, it is traded in

various forms like fresh berries, parchment beans, dried

green beans, roasted whole beans and ground coffee by

organized farmers and individual coffee growers

consolidated by private coffee processors.

Buyers and processors consider moisture content (usually

14%) and purity (no broken beans and foreign matters

included) as the primary qualities of a good traded coffee

bean, however, some private roasters say that there is no

such 1st class and second class coffee beans but depends

on the roasting procedures by processors.

The proliferation of coffee shops all over the country to

include foreign investors like the Starbucks, which is the first

international coffee chain to penetrate the Philippine market,

the Figaro Coffee company, the largest domestic coffee shop

(30 outlets), two in Baguio City (CAR) and one in Davao City,

thus big demand for coffee beans. Local processors and

coffee shops also sprouted like mushrooms in Mountain

Province including the indigenous Alamid Coffee that sells up

to PhP200.00 per cup in the tourist destinations within the

province. These serve as the established markets for the

locally grown and processed coffee products in Mountain

Province. Markets outside the province that comprise more

or less 30% of the total production goes to Kalinga, Ifugao,

Baguio City and Benguet province and in Metro Manila

markets (DTI VCA).

The Philippines imports around 75,000 MT to 100,000 MT of

coffee annually from Vietnam and Indonesia (data from The

Philippine Star, Oct. 30, 2013) at a cost between P7-10

Billion. Experts report that there is a need for all stakeholders

to support the expansion of coffee plantation to 60,000

hectares to meet the demand for coffee.

B. Investment Plan

The Value Chain Analysis as a tool in identifying appropriate

interventions to improve if not to give solutions to underlying

issues and problems in agricultural development in the

province,strengthen proper utilization of meager

development funds of a 4th class province. It also pursues a

commodity-based approach to holistically analyze the

requirements of certain commodities and industries such as

economic viability and sustainability and generally promotes

public and private partnership towards self reliant

commodity-based industries.

The priority commodities identified for Mountain Province like

coffee, highland vegetables such as bellpepper, carrot, white

potato, cabbage, lettuce (protected cultivation) and

traditional rice production will be enhance through the

Philippine Rural Development Program (PRDP) through the

provision of technical, financial and infrastructure support

services to address the issues and concerns besetting the

industries in the province; and thereby increasing value-

added incomes and opportunities that are equally benefiting

producers, traders and consumers. There will be an equal

distribution of the benefits derived from value-adding as

identified in the Value Chain Analysis of the Coffee Industry

in the province.

MATRIX TABLE (PROPOSED INTERVENTIONS)

Value Chain Segments & Services

Key Gap/ Constraints in VC Development in the Province

Brief Description of Potential Intervention

Target Result/ Outcome including #of farmers

Target Areas to be covered

Proposed Lead & Other Players for sub-project implementation

Estimated Project Cost

Risk & Risk Management

Remarks Rank

INPUT SUPPLY

->inadequate supply of organic fertilizer ->High cost of inorganic fertilizers ->Lack of organic fertilizer production facility/ center >poor and inadequate coffee seedling production ->No quality control/ quarantine not implemented

>establishment of a cluster fertilizer production facility with complete accessories like heavy duty compost shredders, shifter machines and dryers, delivery elf, fermenting vats, etc. >upgrading of existing nurseries with protective structures (net house/ green house) >formulate organic fertilizer quality standards and control system

>three centers established for the sustainable production of organic fertilizer >3992 arabica coffee growers >2,000 robusta/excels Coffee growers >two private nurseries >10 municipal and barangay nurseries >quality standard formulated and disseminated for growers

>three clusters 1. Western municipalities: - Bauko - Besao - Sabangan - Sagada - Tadian 2. Eastern municipalities - Barlig - Natonin - Paracelis 3. Central municipalities - Sadanga - Bontoc >all municipalities >Province wide

>Cooperatives within the clusters >BSWM >DA-RFU >LGUs >LGUs >Cooperatives within the clusters and/or private nurseries >DA-RFU >Cooperatives within the clusters >DA-RFU >LGUs >DTI >Farmers

5M per cluster Cooperative(20%)= 1.0M PRDP(80%) = 4.0M 2.0M 0.5M

>source of materials for composting will be depleted but cooperatives should be responsible to plant nutrient yielding plants and for the project to include the integration of livestock especially cattle fattening (cut and carry)

>This facility will produce the needed/requirements of the identified priority commodities like coffee, highland vegetables, and rice production >Upgrading of existing nurseries to produce the required seedlings for expansion areas >The Philippine Recommends for Coffee Production and the BSU Coffee Production Guide be consolidated as basis for the Formulation of a quality standards and control system for coffee

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COFFEE PRODUCT ION

>low productivity and income of farmers >inadequate irrigation facilities >poor farm to market access roads

>provision/ improvement of production facilities such as SFRs, SWIP, CIS, drip irrigation facilities

>5,000 farmers with improved productivity and incomes >improved/ rehabilitated irrigation facilities/access roads and pathways

>Province wide SFRs and drip irrigation facilities distributed 1.Construction of Amkaling-Manngao CIP 2. Improvement of Omaneb-eb-Bathong CIS 3.Construction of Pandey SSIP 4. Construction of Bila SWIP 5. Construction of Decyao-Ramp Pump CIP 6.Improvement of 8km CIS (Belwang) 7. Spring Development 1. Besao- Nacawang-Nacawang-Tadian Road 2. Poblacion, Paracelis-Bantay FMR 3.Kalimbatawa FMR 4.Demang FMR 5.Andanum-Banao-Guinzadan

>Coops/LGUs/ beneficiaries Natonin LGU Natonin LGU Bauko LGU Bauko LGU Bauko LGU Sadanga LGU Tadian LGU >Provincial LGU >Provincial LGU >Provincial LGU >Provincial LGU >Provincial LGU

100M 30.0M 10.0M 5.0M 13.0M 5.0M 50.0M 15.0M >132,488,100M PLGU(10%)= 13,248,810M PRDP(90%)= 119,239,290 >35.0M PLGU(10%)= 3.5M PRDP(90%)= 31.5M >40.0M PLGU(10%)= 4.0M PRDP(90%)= 36.0M >4.0M PLGU(10%)= 400.0k PRDP(90%)= 3.6M >7.0M PLGU(10%)= 700.0k PRDP(90%)= 6.3M

RROW/ this will be handled through the Provincial Engineers Office (RROW Agent)

>Facilities and access roads will be developed for the other priority commodities in the province >For CY 2015 >Full blown FS,DED and counterpart included in the Provincial CY2014AIP <>FS on-going for other proposed rehabilitation of provincial roads

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Value Chain Segments & Services

Key Gap/ Constraints in VC Development in the Province

Brief Description of Potential Intervention

Target Result/ Outcome including #of farmers

Target Areas to be covered

Proposed Lead & Other Players for sub-project implementation

Estimated Project Cost

Risk & Risk Management

Remarks Rank

COFFEE PRODUCT-ION

>low productivity and income of farmers >inadequate irrigation facilities >poor farm to market access roads

>improvement/ rehabilitation of access roads and foot pathways

>5,000 farmers with improved productivity and incomes >improved/ rehabilitated irrigation facilities/access roads and pathways

6.Toboy FMR 7.Mainit Patogong FMR 8.Beas-Curba FMR 8.Betwagan FMR 9.Sagada Pathway 10.Sabangan Pathway 11. Nacawang-Mabalite FMR

<Natonin-PLGU <Bontoc-PLGU <Bauko-PLGU <Sadanga-PLGU <Sagada LGU <Sabangan LGU <Tadian LGU

RROW/ this will be handled through the Provincial Engineers Office (RROW Agent)

>For CY 2015

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Value Chain Segments & Services

Key Gap/ Constraints in VC Development in the Province

Brief Description of Potential Intervention

Target Result/ Outcome including #of farmers

Target Areas to be covered

Proposed Lead & Other Players for sub-project implementation

Estimated Project Cost

Risk & Risk Management

Remarks Ranks

COFFEE PRODUCT ION

>limited skills and technical knowledge >lack of production techno-guide and standard and standards on organic farming/production >labor intensive in harvesting coffee berries >die-back of planted coffee seedlings

>Formulated/ updated techno guide and standards and disseminated to stakeholders >capability building activities including conduct of on-farm research

>5,000 coffee growers improved practices and increased production

>Province wide >LGUs/ cooperatives/ farmers >DA-CARFU

0.5M >Integrated production techno guides including superior farmers practices and research results by SUCs and other research institutions (PCARRD/HARRDEC, PCIERD/CIERDEC, ERDB-DENR, BPI, etc)

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COFFEE PROCESS ING

>Low quality of coffee beans due to cracking during dehulling and no proper drying after depulping

<Provision of post harvest facilities and complete accessories

>Good quality and volume of coffee beans produced >78,000kg produced >5,000 coffee farmers improved income

>Arabica coffee growing municipalities >Robusta Coffee growing municipalities

<Cooperatives 2.5M Coops(20%)= 0.5M PRDP(80%)= 2.0M

All risk shall be shouldered by the Cooperatives apart from the counterpart to the project.

Willingness of cooperatives to partner in agricultural development in the province.

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>Sporadic location of processing equipments

>Establishment of provincial processing/trading center with complete accessories like coffee roaster, grinder, sealer, packaging materials/machine, other small equipments

>Functional Provincial Processing and Quality Control Center established (&0% of the green beans produced)

Sagada and Paracelis

>Cooperatives Willingness of cooperatives to partner in agricultural development in the province

COFFEE TRADING & FINAL SALE

<Delayed payment by traders <Limited business linkages

<Establishment of municipal buying centers of green beans or parchment coffee

<10 MBCs established and provided with appropriate accessories

Province wide <Cooperatives per municipality

<10.0M Coops(20%)= 2.0M PRDP(80%)= 8.0M

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IV. INSTITUTIONAL ARRANGEMENT FOR PRDP FUNDING

1. Implementation Arrangement/Implementation Supervision

The implementation arrangement/mechanism is stipulated in the Memorandum of Agreement between the Department of Agriculture Secretary and the Provincial Governor of Mountain Province defining the terms and conditions, roles and responsibilities of PRDP program implementation. The scope of agreement covers the implementation of I-BUILD, I-REAP, and I-SUPPORT components of PRDP. The role of the province include among others, the provision of required counterpart funding, coordination with municipal LGUs in planning, implementation, monitoring PRDP sub-projects and ensuring environmental and social safeguards.

2. Organization and Management

The Department of Agriculture is the executing agency of the PRDP. A National Program Coordinating Office (NCPO) is established at the DA Central Office headed by the Undersecretary of Operations to oversee the operations of the Program Support Offices (PSOs) for Luzon, Visayas and Mindanao with two cluster in Luzon. The PSOs on one hand, are established to oversee implementation of the PRDP components in all regions covered by the project. CAR to which Mountain Province belongs together with regions 1,2 and 3 is covered by the Luzon A cluster located at San Fernando Pampanga in Region 3.

A Regional Program Coordinating Office (RCPO) is also established in each region headed by the Regional Technical Director for Operations who takes the lead role in coordinating the overall implementation of the components of PRDP of recipient provinces.

2.1 Provincial Program Management and Implementing Unit (PPMIU)

The Provincial Program Management and Implementing Unit (PPMIU) of Mountain Province was established pursuant to Executive Order No. 41 signed by the Provincial Governor, Atty. Leonard G. Mayaen. The PPMIU is tasked to coordinate program implementation of the PRDP covering I-Plan, I-REAP, I-BUILD components. Its composition is as follows:

a. Provincial Governor -Chairman b. Provincial Planning &

Development Coordinator -Co-Chairman c. Asst. Provincial Department

Head-PPDO -I-PLAN Head d. Provincial Engineer -I-BUILD Head e. Provincial Agriculturist -I-REAP Head f. Support Units -I-SUPPORT g. Provincial Accountant -Finance Unit Head h. Provincial BAC Chairman -BAC-TWG Head i. PPDO Project Evaluation Officer

-Monitoring &Evaluation Head

j. Asst. Provincial Department Head -Social & Environment Safeguard

k. Provincial Information Officer -Information Unit Head

2.2 Functions of the PPMIU

a. Coordinate/Manage the over-all program implementation at the provincial level; b. Conduct assessment of implementation, meetings and workshops with MPMIUs and POs/Cooperatives; c. Provide assistance on program implementation at the municipal level; and d. Prepare and submit program/component reports to RCPO, etc.

2.3 I-PLAN Component

The I-PLAN component is headed by the Assistant Provincial Department Head of the Provincial Planning & Development Office tasked to coordinate the preparation of the Value Chain Analysis for coffee, highland vegetables, and traditional rice production to be supported by PRDP; the preparation of Feasibility Studies for identified projects in the PCIP per commodity in close coordination with the Engineering staff, among others.

2.4 I-BUILD Component

The implementation of the infrastructure component of PRDP shall directly be supervised by the Provincial Engineering Office; it being the implementing arm of the Provincial Government on infrastructures. The scope of coverage shall be the infrastructure projects under the I-BUILD component as well as infrastructure sub-projects under the I-REAP component. These specific activities cover the preparation of Feasibility Studies, program of works and detailed engineering designs including compliance to certain requirements of the proposed projects, monitoring and supervising progress of implementation/submit reports to PPMIU and RCPO, etc.

2.5 I-REAP Component

This component, headed by the Provincial Agriculturist serves as the focal point for coordination of all provincial I-REAP implementation activities. This included participation in the I-PLAN component in the review and preparation of the PCIP; assist proponents in the preparation of Business Plans for I-REAP funding based on the PCIP, monitor the implementation of I-REAP component in the province and furnish reports to RCPO, etc.

2.6 I-SUPPORT Component

This comprises the finance, procurement, monitoring and evaluation units in support of the project.

The Finance Unit headed by the Provincial Accountant is in-charge managing program funds released to the province together with local counterpart fund; processing payment to suppliers; maintaining and preparation of liquidation reports or statement of expenditures to the World Bank, among others.

The procurement unit shall be responsible in conducting procurement of goods covered under the PRDP based on the procurement plan containing the projects for implementation and submit it to the PPMIU to RCPO/World Bank for review and approval/issuance of NO OBJECTION LETTER (NOL). The Chairman of the BIDS and Awards Committee with the Head of the BAC Secretariat shall be directly responsible in the preparation of all bidding documents and awarding of projects to winning bidders.

3. Monitoring and Evaluation

PPMIU through the Monitoring and Evaluation Unit shall coordinate monitoring the progress status of project components covered by the project; consolidate reports and submit the same on a regular basis to the Regional Program Coordinating Office (RCPO) using data capture forms. Problems and issues which impede program implementation for remedial action shall likewise be included in the report.

The senior staff of the PPDO in-charge of special projects shall be the focal person of this unit with assigned staff of the Provincial Engineer’s Office and Provincial Agriculture Office.

4. Safeguards

There are various safeguards by the PRDP to ensure that the sub-projects comply to certain requirements to be socially and environmentally acceptable.

For proposed I-BUILD, existing road project, proponents or LGUs are required to acquire Certificate of Non-Coverage (CNC) from the Department of Environment and Natural Resources but for proposed road opening, an Environment Compliance Certificate (ECC) is required. Road right-of-way problem shall likewise be complied by submitting certificate from the Provincial/Municipal Engineers for existing road projects.

For I-REAP enterprise development projects, consultations shall be undertaken to all concerned stakeholders relative to proposed enterprise to be prioritized in the PCIP and subsequently to be implemented by cooperatives or entrepreneurs as the case maybe.

Prepared by: Noted by:

CONCEPCION P. WANGDALI LILYROSE T. KOLLIN APDH/I-PLAN PPDC/PPMIU Co-Chairman

Recommending Approval: LEONARD G. MAYAEN Provincial Governor/Chairman PPMIU

APPROVED: MARILYN V. STA. CATALINA Regional Director/DARFU-CAR/RCPO