Intensive Learning-by-Doing in the Agribusiness of Coffee – 1 of 2

Coffee Plant at Nestle, Tagum

Intensive learning is the best innovation catch-up strategy for the Philippines (See Post #87 for more on intensive learning.).

Nestle’s Robusta coffee is an opportunity where intensive learning will yield huge benefits in total factor productivity.

Nestle used Scan-Adapt-Diffuse as the technique to find the appropriate technology in Robusta coffee for an emerging market like the Philippines.

Thus, coffee STI-Learning is ready to share and diffuse from Nestle. Given the available and path-created, high yield technology, it is hoped that farmers will take the offered opportunity. The big challenge is adapting to the change in culture demanded by agribusiness from the more sedate farming.

One success story in intensive learning (See Post #43) is Shemberg’s Philippine natural grade carrageenan (e407a).

Robusta coffee (Coffea canephora) and black pepper are opportunities where the market need is established and competitive market-based price are available.

Coffee Nursery Expansion

To initiate intensive learning, the STI-learning end is represented by a whole technology spectrum and has been scanned, adapted and made ready for extension into Philippines farms. For coffee, this spectrum starts from specie selection (four clones – IC2, IC7, IC8 and S274) and goes through cultivation, post-harvest and final quality specifications.

The DUI-learning end in actual investment to achieve the high yield/high return potential is the bottleneck. There is un-stellar success in the diffusion or commercialization.

For new SYNTHESiST visitors, STI means science and technology infrastructure while DUI means doing, using and interacting (also called learning-by-doing). Lundvall’s model of the national innovation system says that a successful national innovation system comes from the continuous and circular interaction between STI-learning and DUI-learning ideally on a substrate of strong economic growth. This whole circle represents intensive learning for latecomer countries. Read more on STI- and DUI-learning by clicking on the subject at Categories at the right sidebar.

Wrong policies have hollowed out industry (and thus the DUI-learning source) in the Philippines. Thus, one leg has been cut off from this model. China’s recent success in innovation shows the importance of the industrial base as DUI-learning source. In learning-by-doing, the Chinese went up the learning curve and improved efficiencies with each unit of experience.

With opportunities in agribusiness and (read future posts) in post-industrial sectors like export labor services like medical care, ship crewing and BPO, I hope we avoid similar policy mistakes. These mistakes resulted in the dual economy as pointed out by Cororaton (See 1st of two entries from Post #12). We can use these new opportunities as launch pads in digging the Philippines out of its hole.
At the training camp in Tagum, Nestle technicians hesitated to say that coffee yields of 3MT per hectare are achievable with the technology they are teaching and instead use 1MT per year as benchmark yield. This is still a big improvement from the present Philippine national average of about 400 kg per hectare. Nestle is teaching Robusta technology for free to those interested in coffee farming.

8,000,000 Rooted Cuttings Needed

Colombia, the world leader attains 3MT while Vietnam, the new leader in Robusta, also claims to have attained 3MT in a fast clip the past few years. I suspect the technicians’ hesitation comes from practical experience. It takes more than technology – like actual farm practices – to attain the higher yield.

At the mentioned 1MT/hectare yield the financial returns translate to roughly 14% ROI if I include the land rental and management costs over the estimated life f 8 – 10 years (before rejuvenation). This is measly considering the risks of farming.

The return rises close to an astronomical 100% at the higher yield 3MT/ hectare even with higher incremental costs from fertilization, cultivation and harvesting.

Theoretically, this return should allow for project financing but that is hard to do in the Philippine agriculture even in Mindanao where the weather is benign but other factors like perception of peace-and-order issues come into play.

Still, the biggest problem with coffee agribusiness to me is cultural. To attain the high yields, the agribusiness requires a huge mindset change to that of industrial culture.

For example, the discipline of ‘formative pruning’ – to maximize the return on nutrient inputs into the berries – needs for the farmer to become an industrial worker. The changes include punctuality and following the detailed cultivation program to the letter.

This program also includes seemingly mundane things like using the right size nursery bag to more important ones like digging the right size hole for proper root development. Other important steps are weeding, following the nutrient replacement needs, pest control as needed, bending and spreading, formative pruning, correct harvesting and post harvest procedures.

Any deviation from the required procedure translates to an equivalent drop in yield. In effect, the difference between 3MT and 400kg per hectare yield for coffee is the sum total of all such deviations.

In developing an industrial culture, I remember our experience at TMX in Cebu in 1982. One of the most important training done was on punctuality. A missing worker in a balanced line at the first minute of production immediately translated to a loss of production. This training was harsh and included locking out latecomers outside the company gates and having their supervisors pick them up. This lasted for some time.

Eventually, the whole company got it. The Cebu plant became the most productive factory in the TMX world. It is still operating at Mactan EPZ today and has been the source of other operations managers in the EPZ as well as of Filipino expatriates to other Timex plants all over the world. In industrial culture, the product and the agricultural process dictate the activities around it.

This culture must be alive and well in the banana and pineapple plantations. Can the enterprising coffee farmer transform himself to reap the high returns from agribusiness? Only if he implements the correct and intensive learning systems will make it so.

Let us learn the similarities and differences with the agribusiness of black pepper in the next post.

Click here for Part 2 of 2.