Improvement of the Beef Cattle Marketing System

in Oriental Mindoro, Philippines

A Research Project Submitted to

Larenstein University of Applied Sciences
In Partial Fulfillment of the Requirements for
the Degree of Master in Agricultural Production Chain Management,
specialization Livestock Production Chain

By
Marissa Ramos Luna
September 2008

Wageningen
The Netherlands
© Copyright Marissa Ramos Luna. All rights reserved
 PERMISSION TO USE

In presenting this research project in partial fulfillment of the requirement for a

Postgraduate degree, I agree that the Library of this University may make it freely
available for inspection. I further agree that permission for copying of this research
project in any manner, in whole or part, for scholarly purposes may be granted by
Larenstein Director of Research. It is understood that any copying or publication or
use of this research project or parts thereof for financial gain shall not be allowed
without my written permission. It is also understood that due recognition shall be
given to me and to the University in any scholarly use which may be made of any
material in my research project.

Request for permission to copy or to make other use of material in this research
project in whole or in part should be addressed to:

Director of Research
Larenstein University of Applied Sciences
Part of Wageningen UR
Forum – Gebouw 102
Droevendaalsteeg 2
6708 PB Wageningen
Postbus 411
Tel: +31 31 7486230
Fax: +31 31 7484884

ii
ACKNOWLEDGEMENT

This research project would not have been a better accomplishment without the
many people and organizations who had given their utmost share. I would like to
extend my heartfelt gratitude to the following:

To the Royal Government of The Netherlands through the Netherlands Scholarship

Program (NUFFIC) which made this Professional Masters possible.

To Mr. Johan Meinderts, my supervisor, for his critical comments and guidance
during the course of the thesis preparation.

To Mr. Robert Baars, our Course Coordinator, who had been very supportive and
accommodating.

To all the other teachers and staff of Van Hall Larenstein who had unselfishly
shared their expertise and time.

To all my classmates who had always been there during the times of triumphs and
difficulties encountered during the whole course.

To the Filipinos in Wageningen whose presence had made me feel less homesick
and who were always ready to extend help in times of problems.

To DA – RFU 4B for allowing me to pursue this Course. To Dra. Yvonne Vinas,

RTD for Administration and Research, for her moral support.

To Fidel Libao, Romnel Salazar, Letecia Laylo and Carmen Honrade for assisting
me during my data gathering and to all the MIMAROPA Research Division staff for
all the support.

To the different agencies (Office of the Provincial Veterinarian and Office of the
Provincial Agriculturist of Oriental Mindoro, Office of the City Veterinarian-Calapan
City, Municipal Agriculture Offices of Naujan, Bansud and Bongabong and LGU-
Padre Garcia, Batangas) for the support extended during the data gathering, both
for the logistics and technical information needed.

To Anton, Marie Toni and Martin Angelo who serve as my inspiration in all my
undertakings.

And to the Lord Almighty for giving me wisdom and strength all these years of my
life.

MARAMING SALAMAT PO!!!

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 TABLE OF CONTENTS

PERMISSION TO USE ..............................................................................................II

ACKNOWLEDGEMENT ...........................................................................................III
LIST OF TABLES .................................................................................................... VI
LIST OF FIGURES .................................................................................................. VI
ACRONYMS ........................................................................................................... VII
ABSTRACT ........................................................................................................... VIII
CHAPTER 1. INTRODUCTION .................................................................................1
1.1 BACKGROUND ..............................................................................................1
1.1.1 Research Problem..................................................................................1
1.1.2 Significance of the Study ........................................................................2
1.1.3 Objective of the Study ............................................................................2
1.1.4 Research Questions ...............................................................................2
1.1.5 Methodology ...........................................................................................3
CHAPTER 2. DESK STUDY......................................................................................4
2.1 THE ORGANIZATION .....................................................................................4
2.1.1 Mission ...................................................................................................4
2.1.2 Vision......................................................................................................4
2.1.3 Goals ......................................................................................................4
2.2 BEEF CATTLE MARKETING IN THE PHILIPPINES ..............................................4
2.3 BEEF CATTLE MARKETING IN OTHER DEVELOPING COUNTRIES......................5
2.4 BENEFITS OF LIVESTOCK FORMAL MARKETS ................................................6
2.5 TRANSPARENCY IN THE BEEF CATTLE CHAIN ................................................6
2.6 THE BEEF CATTLE SECTOR IN ORIENTAL MINDORO .......................................7
2.7 BEEF SUPPLY CHAIN ....................................................................................8
2.7.1 Farmers/producers .................................................................................9
2.7.2 Barrio Agents/Traders ..........................................................................10
2.7.3 Auction Market......................................................................................10
2.7.4 Slaughterhouse ....................................................................................10
2.7.5 Feedlot Operators.................................................................................10
2.7.6 Retailers ...............................................................................................10
2.7.7 Consumers ...........................................................................................10
2.7.6 Stakeholders.........................................................................................10
2.8 THE PEST ENVIRONMENT ..........................................................................11
2.8.1 Political .................................................................................................11
2.8.2 Economic..............................................................................................11
2.8.3 Socio-cultural........................................................................................11
2.8.4 Technical ..............................................................................................12
CHAPTER 3. RESEARCH FRAMEWORK OF FIELD STUDY ...............................13
3.1 STUDY AREA ..............................................................................................13
3.2 METHOD OF DATA GATHERING ...................................................................13
3.3 DATA ANALYSIS .........................................................................................14

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CHAPTER 4. RESULTS OF FIELD STUDY ..........................................................15
4.1 DEMOGRAPHIC DATA ..................................................................................15
4.2 PROBLEMS IN THE BEEF SUPPLY CHAIN ......................................................16
4.3 THE BEEF CATTLE MARKETING SYSTEM IN ORIENTAL MINDORO ..................17
4.3.1 Marketing of Beef Cattle .......................................................................17
4.3.2 Marketing Facilities or Structures .........................................................17
4.3.3 Costs Incurred in Marketing Cattle .......................................................17
4.3.4 Source of Market Information ...............................................................18
4.3.5 Role of Middlemen................................................................................19
4.3.6 Role of Government in Beef Cattle Marketing ......................................19
4.4 NEED FOR A FORMAL MARKET ....................................................................20
4.4.1 Benefits of a Livestock Formal Market .................................................20
4.4.2 Problems Encountered by a Livestock Formal Market .........................20
4.4.3 Requirements for Establishment of a Formal Market ...........................21
CHAPTER 5. DISCUSSION OF RESULTS ...........................................................22
5.1 DEMOGRAPHIC DATA ..................................................................................22
5.2 INFLUENCE OF THE BEEF CATTLE SUPPLY CHAIN ON MARKETING ................22
5.2.1 Stakeholders of the Chain ....................................................................22
5.2.2 Problems Incurred in the Chain ............................................................22
5.3 THE BEEF CATTLE MARKETING SYSTEM IN ORIENTAL MINDORO ..................23
5.3.1 Marketing of Beef Cattle .......................................................................23
5.3.2 Marketing Facilities or Structures .........................................................24
5.3.3 Costs Incurred in Marketing Cattle .......................................................24
5.3.4 Source of Market Information ...............................................................24
5.3.5 Role of Middlemen................................................................................25
5.3.6 Role of Government in Beef Cattle Marketing ......................................25
5.4 NEED FOR A FORMAL MARKET ....................................................................25
5.4.1 Benefits of a Livestock Formal Market .................................................26
5.4.2 Problems Incurred by a Livestock Formal Market ................................26
5.4.3 Requirements for Establishment of a Livestock Formal Market ...........27
5.4.4 Opportunities in the Province That Contribute to the Improvement of the
Cattle Marketing System ..................................................................................27
CHAPTER 6 CONCLUSION AND RECOMMENDATIONS ....................................28
6.1 CONCLUSION ...................................................................................................28
6.2 RECOMMENDATIONS ........................................................................................29
REFERENCES.........................................................................................................30
APPENDICES..........................................................................................................33

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 LIST OF TABLES

Table 1. Beef Cattle Production in Oriental Mindoro…………………………………7

Table 2. Number of Cattle Shipped-out in Oriental Mindoro………………………...8
Table 3. The Study Areas………………………………………………………………13
Table 4. Distribution Table for No. of Years in Cattle Fattening……………………15
Table 5. Distribution Table for No. of Cattle Raised…………………………………15
Table 6. Distribution Table for Income per Head of Cattle………………………….16

LIST OF FIGURES

Figure 1. The beef cattle supply chain in OrientaMindoro……………………………9

Figure 2. Problems incurred by farmers………………………………………………17
Figure 3. How cattle is marketed………………………………………………………18
Figure 4. Source of market information……………………………………………….19
Figure 5. Perception of farmers on importance of middlemen……………………...20
Figure 6. Perception of farmers on need for formal market…………………………21

vi
 ACRONYMS

BAS – Bureau of Agricultural Statistics

DOST – PCARRD – Department of Science and Technology – Philippine Council
for Agriculture and Resources Research and Development
MIMAROPA – Oriental Mindoro, Occidental Mindoro, Marinduque, Romblon and
Palawan
CALABARZON – Cavite, Laguna, Batangas, Rizal and Quezon
LAM – Livestock Auction Market
DA – RFU – Department of Agriculture-Regional Field Unit
BAI – Bureau of Animal Industry
OPV – Office of the Provincial Veterinarian
LGU – Local Government Unit

vii
 ABSTRACT

Poor livestock marketing system in the Philippines is considered as one of the

weaknesses in the livestock industry. To determine if this problem holds true in the
island province of Oriental Mindoro, a survey on forty one (41) smallholder cattle
farmers and 3 case studies were done. The objective of this study is to assess the
beef cattle marketing system in the province and find out if a livestock formal market
is needed to improve the marketing system.

Results showed that livestock farmers are raising 3 – 5 animals in 1 – 3 years with
an income per head of P7000 – 10000.

Although the cattle marketing system is characterized by the traditional system

wherein traders buy the animals at the farmers’ place through some barrio agents
who bring the animals in one common place in the municipality, it was concluded
that the marketing system is not that inefficient, considering the low input production
practiced by the farmers, the continuous supply or offtake of live animals and the
income the farmers are getting per head of cattle.

Farmers have recognized the importance of middlemen as helping them to save

costs in terms of time and money. Trust has been established and farmers believe
that middlemen are not earning much from them. Middlemen play a major role.
Transaction cost per head of animal ranges from P1350 – P1950, which an ordinary
farmer raising 3 – 5 head could not easily afford if he will do the marketing to the
mainland himself.

The beef cattle supply chain is fragmented in that each actor functions separately,
although linkage between farmers and middlemen have been established.
Strengthening the chain is necessary to help revitalize the cattle industry.

The need for formal market is evident in both farmers, middlemen and the local
government unit. And to realize such need, there shall be a strong cooperation
between the local government unit, the farmers and all the other stakeholders. In
line with this, revitalization of 2 livestock auction markets is being recommended.

viii
 CHAPTER 1. INTRODUCTION

1.1 Background

In the Philippines, the livestock industry is firmly integrated into the structure of the
farm and village life. Raising of farm animals, particularly, cattle and carabao, is still
predominantly a backyard enterprise. The Bureau of Agricultural Statistics (BAS)
reported that of the total cattle stocks from 2003 – 2007, 94% comes from the
backyard farms (Appendix A). Backyard enterprise in the country is characterized
by farmers breeding or fattening one or a few head cattle or carabao which are stall-
fed or tethered along roadsides and backyards.

Commercial ranches engaged in cattle raising are decreasing due to a combination

of factors like, poor peace and order situation in production areas, implementation
of the comprehensive agrarian reform law, land use conversion, lack of domestic
source of quality stocks, changing policies on pasture lease, increasing input costs
and poor herd and pasture management (DOST-PCARRD, 2001), lack of farm-to-
market-roads and inadequate market information system (Castillo, 2000).

According to the Cattle Industry Performance Report of 2006 (BAS, 2007), the
livestock sector was posted to increase by 2.38%, which contributed to 12.96% of
the total agricultural production. However, this increase was accounted to the
increase in production of the dairy, poultry and hog sectors. From 2003 – 2006,
cattle production has been decreasing, from 258.45 thousand metric tons to 238.27
thousand metric tons (Appendix II). But with the increasing human population and
change in the eating habits of Filipinos, the beef sector is believed to have a bigger
room for growth. Per capita consumption of beef is 4.4 kg in 2006 as compared to
4.1 kg in 2003 (www.fas.usda.gov/dlp/circular/2006/06-03LP/bpppcc.pdf).

1.1.1 Research Problem

Oriental Mindoro is one of the island provinces of the MIMAROPA (Oriental Mindoro,
Occidental Mindoro, Marinduque, Romblon and Palawan) Region in the Philippines.
With regards to beef cattle production of the province, about 97% is being produced
at the backyard level (BAS,2007). Problems on production are being well-addressed
by different government organizations through research and development.
Marketing of beef cattle, however, is given the least concern. Beef cattle are
marketed by farmers informally, i.e., they just have to wait for traders or middlemen
to come and command prices for their animals. Most of the time, liveweights are
determined through eye estimates. Being in the island province, transportation and
handling costs limit these farmers to sell their animals themselves.

Further, farmers have little information on market prices. Information flows play an
important role in bringing about efficiency in marketing. Middlemen and traders may
be able to exploit this information failure to the disbenefit of small farmers
(Riethmuller and Smith, 1994 ).

In a survey conducted by FAO regarding the livestock industries in the Asia-Pacific

Region in 2001, poor livestock marketing system was one of the weaknesses
identified in the Philippine livestock sector.

1
1.1.2 Significance of the Study
Looking into the present beef cattle marketing system and finding options to
improve the existing system may be a way to encourage the farmers to increase
beef cattle production in the province. Farmers have been doing the traditional way
of selling live animals to slaughterhouses and feedlot operators through the help of
middlemen.

Improving the marketing system through the establishment of a formal market may
be one of the strategies to help farmers gain more access to market information.
ENTREPinoys Atbp (2008) cited that the degree of competition among buyers of
live animals is high and price is more advantageous to producers if they are sold in
auction or livestock markets.

One of the major projects of the Department of Agriculture through the Ginintuang
Makamasa sa Agrikultura (GMA)- Livestock under the Post-Harvest Development
Services is the establishment of Livestock Auction Markets (LAM). These are
markets where farmers bring their livestock for sale under more systematic
procedures. A weighing scale is provided and prevailing prices per kilogram live
weight are posted. Results of this research may give some information necessary
for consideration of the GMA-Livestock Program of revitalizing a formal market in
Oriental Mindoro.

1.1.3 Objective of the Study

To assess the beef cattle marketing system in Oriental Mindoro and find out if a
livestock formal market is needed to improve the marketing system.

1.1.4 Research Questions

1.1.3.1 How does the beef production chain influence cattle marketing system in the
province?

1. Who are the stakeholders of the chain?

2. What are the problems in the chain?

1.1.3.2 How efficient is the beef cattle marketing system in the province?

1 .How are beef cattle marketed?

2. What are the marketing facilities or structures available?
3. What are costs incurred in marketing of beef catte?
4. How do farmers get information on market price?
5. What are the contributions and role of middlemen and/or traders?
6. What is the government doing to improve beef cattle marketing?

1.1.3.3 Is there a need for a formal market?

1. What are the benefits of having a livestock formal market?

2. What are the problems incurred?
3. What are the necessary requirements for establishment of a formal market?
4. What are the opportunities in the province that could contribute to the
improvement of the marketing system?

2
1.1.5 Methodology
A desk study prior to the conduct of the field research was done to gain more
knowledge on the beef cattle marketing chain in the Philippines and the marketing
practices being done in different developing countries. Field research composed of
a survey on marketing system employed by farmers in Oriental Mindoro and 3 case
studies on a successful livestock auction market in the adjacent region, on role of
middlemen and the local government unit were done to gather information that
would answer the research questions.

The study was conducted in the province of Oriental Mindoro, covering its 2 Districts
for the period July – August , 2008.

A more detailed methodology is described in the Research Framework in Chapter 3.

3
 CHAPTER 2. DESK STUDY

2.1 The Organization

To have a better understanding of why this research was undertaken, a brief

description of the organization was reviewed.

The Department of Agriculture (DA) is the principal agency of the Philippine

government responsible for the promotion of agricultural development. In pursuit of
this, it provides the policy framework, helps direct possible investments, and in
partnership with the local government units, provides support necessary to make
agriculture and agri-based enterprises profitable and helps spread benefits of
development to the poor farmers, particularly, those in the rural areas.

2.1.1 Mission
The mission of the DA is to boost farmers’ income and reduce poverty incidence in
the rural sector through the Medium Term Philippine Development Program. Its
vision is “having prosperous and rural communities, built on profitable farms that
provide surplus for agro-industry and food security”.

2.1.2 Vision
Its vision is “having prosperous and rural communities, built on profitable farms that
provide surplus for agro-industry and food security”.

2.1.3 Goals
With emphasis on agribusiness, the twin goals of DA under the present
administration are a) to develop at least two million hectares of new land for
agribusiness in order to contribute to 2 million jobs targeted in 2010 and b) to
reduce cost of wage goods through productivity enhancement, more efficient
logistics and improved retailing linkages.

2.2 Beef Cattle Marketing in the Philippines

Cattle and carabao marketing in the Philippines, according to EntrePinoy Atbp

(2008), are characterized by the existence of many middlemen in the distribution
network which is to the disadvantage of producers who received relatively low price
for their animals and consumers who pay high price for meat products. Studies
have shown that the gross margin derived in selling a head of cattle or carabao is
60-88%.

In the province of Isabela, the second biggest province in the Philippines in terms of
land area, middlemen or livestock traders buy live cattle from the farmers and sell
them either to auction markets, to butcher-retailers or to feedlot operators. They
usually have bigger margins because cattle are bought from the farmers at a much
lower price. These middlemen have good market information (Rodrigo,2007).

4
2.3 Beef Cattle Marketing in Other Developing Countries

In Vietnam most of the farmers do not have access to organized markets and
auctioning systems so that information about markets, prices and other issues are
limited. The lack of organized system of live animal markets has resulted in the
majority of marketing and distribution of live animals being undertaken through a
network of marketers operating in informal groupings and often, exchanges take
place on a face to face basis. Beef cattle marketing is composed of 4 middlemen:
trader, wholesaler, slaughterer and retailer (Lapar, et.al, 2003).

According to Knips (2004) local trade of cattle, pigs and chicken between the
villages in Cambodia often takes place for payments in kind rather than in cash.
Town traders, such as slaughterhouse operators or market sellers come to the
villages to purchase the animals. Less frequently, villagers bring their animals to
town to sell them directly to consumers.

In Thailand, there is no standard price for beef cattle and markets are not well-
developed (FAO RAP, 2002a).

The marketing system for cattle and buffalo in Lao is characterized by small traders
bringing the animals to nearest truck loading points. Traders based in major towns
organize collection by trucks and supply the urban market. Transaction costs are
generally high but they are not likely to have a major effect on livestock prices since
the value of animals per kilogram is high. However, access to market information is
limited which put farmers into a disadvantage when negotiating sale prices for their
livestock (Stur, et.al, 2002).

Marketing was one of the weaknesses identified in the livestock sector of the Asia-
Pacific regions, as reported by FAO in February 2001. Concerns were expressed
about the marketing activities of middlemen, who are apparently much better at
gauging weight and yield of animals. In Bangladesh, it was cited that farmers get
low profits due to payments of high commission to middlemen. Recommendation for
a village-based livestock market and provision of weighing scales for livestock were
made.

In Sri-lanka, the marketing system has evolved through active participation of

private butchers and agents. A village has such an agent who identifies the animals
for sale and collects a number of animals sufficient for a wagon load and brings
them to a central holding location from where the agent arranges the transport to
the slaughterhouses. It was reported that the farmer gets less than 40% of the retail
price of meat and the rest of the profit goes to the middlemen (Abeyrante, 2007).

A report from KIT and IIRR (2008) disclosed that before 2006, the farmers in Mbire
District, Zimbabwe sold cattle directly to the traders with distrust and a few guided
rules for interacting. In 2006, farmers tried to bypass the traders by selling directly to
the abattoirs. After experiencing problems, they reverted to using traders, but with
more transparency and a greater sense of partnership within the chain.

Results of a survey on smallholder farmers in Cambodia conducted by Neou (2007)

showed that 82.5% of the respondents preferred selling their cattle to local
middlemen since they get more profit while 27.5% sell to the local butcher.

5
2.4 Benefits of Livestock Formal Markets

A study conducted by Musemwa, et. al (2007) in Kamastone Village,Eastern Cape

Province on marketing channels for smallholder farmers concluded that
development of an efficient and sustainable livestock marketing system for the
small-scale farmers was one of the main strategies that would improve small scale
farmers' access to formal markets. An improved livestock marketing system is likely
to increase participation of small scale farmers in commercial agriculture that would
mean higher income for them.

Marketing efficiency can be improved by reducing the number of stages in the

marketing channels by encouraging direct selling from producers to butcher-
retailers or processors. Sometimes, this is not possible due to the location of
producers relative to markets and the prevalence of small-sized farms, resulting to
small volume of sales. Establishing livestock markets near production areas, to
increase degree of competition could be feasible (PCARRD, 1995).

According to the Department of Agriculture-Bureau of Animal Industry (DA-BAI) a

livestock auction market system promotes fair trading between farmers and buyers,
creates awareness on the animal health condition before selling them through
issuing of veterinary certificates and augments revenue collection of the local
government units through fees being charged from facilities and services they
deliver top farmers and buyers. It provides facilities and services, like weighing
scale, grading chart and marketing information on prevailing prices of livestock.
(http://www.bai.ph/faq.html#market).

In the province of Negros Oriental, Central Visayas Region Philippines, (Appendix C)

there are 16 livestock auction markets (LAM) that are operating successfully.
According to the Provincial Veterinarian, Dr. Antonio Mutia, “ one way of helping
livestock farmers is the establishment of LAMs where their animals are graded and
assessed at market value. In this way, farmers will know the true value of their
produce, which they can leverage against unscrupulous traders” (Abao, 2005).

One of the most successful LAMs in the country is in Urdaneta City, Pangasinan in
the Ilocos Region (Appendix C) which caters to 1,140 livestock each week, of which
550 – 600 are cattle. It does not only generate monthly revenues for the city
government but it also serves as a catalyst for further agro-industrial growth of the
province (Abao, 2007).

2.5 Transparency in the Beef Cattle Chain

Castano (2001) pointed out that information helps farmers, traders and consumers
to balance supply and demand at markets and thus, avoid gluts and surpluses. The
knowledge that a farmer can compare one price offered by a trader with another
price also influences buyers in offering fair prices. Access to better information
enables wholesalers to reduce their business risks and to operate profitably on
lower margins. Consumers could in turn be influenced by market news, such as,
they can be encouraged to buy products that are plentiful and leave products that
are in short supply.

Kularatne, et.al (1999) stated that in order to develop a strong linkage throughout
the chain, vertical coordination from the producers through the consumers is
6
necessary. This statement was shown in his study in Saskatchewan, Canada
wherein a large majority of respondents agreed on the need for increased
cooperation between sectors.

2.6 The Beef Cattle Sector in Oriental Mindoro

Just like in most provinces in the Philippines, cattle raising in Oriental Mindoro is
recognized as a key element which contributes to rural income and to the efficient
use of available resources in the rural sector. It is an activity intimately tied to the
farmers’ way of life and serves as a source of cash in time of need. Further, cattle
offers a means whereby crop products, farm residues and native vegetation in
uncultivated areas are converted into meat, milk, hides and other by-products.

Beef cattle population in the province is 29,847 head, of which 28,047 head are
raised by smallholder farmers and only 1,800 head by commercial raisers
(BAS,2007). Table 1 shows the total population per municipality.

Table 1. Beef Cattle Population in Oriental Mindoro

Municipality Backyard Farms Commercial Farms Total
(No. of Head) (No. of Head) No. of Head
Puerto Galera 265 - 265
San Teodoro 220 50 270
Baco 981 - 981
Calapan City 1,868 100 1,968
Naujan 4,250 329 4,579
Victoria 472 - 472
Socorro 733 - 733
Pola 767 - 767
Pinamalayan 1,386 - 1,386
Gloria 3,230 - 3,230
Bansud 1,934 140 2,074
Bongabong 6,513 186 6,699
Roxas 1,313 147 1,460
Mansalay 2,408 147 2,555
Bulalacao 1,707 198 1,905
TOTAL 28,047 1,800 29,847
Source: Bureau of Agricultural Statistics (2007)

Data derived from the DA-Animal Quarantine report for January – December
2007 and January – June, 2008 show that an average of 359 head cattle are
shipped to other regions by traders monthly, as shown in the Table 2.

7
Table 2. Number of Cattle Shipped in Oriental Mindoro (2007 – 2008)

Month/Year No. of cattle shipped

January 2007 350
February 482
March 352
April 352
May 364
June 441
July 529
August 482
September 387
October 238
November 306
December 353
Total 4636
January 2008 259
February 137
March 297
April 221
May 390
June 515
Total 1819
Grand Total 6455
Average/month 359

Source: DA-Animal Quarantine Office (2008)

The total number of cattle slaughtered from January – December 2007 is 8,844
head, giving 2,254 metric tons. Liveweight of the animals is 255 on the average
(PASO, 2008).

Offtake is a production parameter which determines population dynamics and

productivity. Total offtake in 2007 is 13,480 head (slaughtered and shipped-out),
which is 45% as compared to the total number of population (Table 1). This is
considerably high as compared to cattle offtake rates in the traditional systems in
Sub-Saharan Africa which ranges from 1.2 – 20% (Otte, et. al, 2002).

2.7 Beef Supply Chain

A desk study on the beef cattle supply chain was conducted prior to the conduct
of the field research to have a general picture of the production part of the chain and
how it influences the marketing system. As a result, the beef cattle supply chain in
Oriental Mindoro was established, as shown in Figure 1.

8
Figure 1. The beef cattle supply chain in Oriental Mindoro

2.7.1 Farmers/producers
The beef cattle supply chain in the province of Mindoro is characterized by being
dominated by backyard farmers, like most of the other livestock production system
in the whole country.

Farmers usually raise 3 -5 head cattle under coconut or rice-farming systems. With
the introduction of improved forages, farmers are utilizing a part of their farm for
pasture establishment which they find important especially during the summer
months. Cattle are raised for 1-3 years but sometimes disposed earlier when farmer
needs cash for his personal needs.

The “paiwi” system is widely practiced. Under this scheme, a livestock owner
provides cattle to a caretaker which the latter raise for a certain period of time.
Income from sale of the animal is divided equally between the owner and the
caretaker after deducting the cost of the animal at purchase plus other costs
incurred like concentrates and drugs.

9
Being a rice-based area, rice straw is the principal feed source after rice harvest.
Other sources of roughage are napier grass, ipil-ipil (Leucaena leucocephala) and
weeds available in the farmers’ field. Concentrate feeding is minimal.

2.7.2 Barrio Agents/Traders

Marketing of live animals is done through middlemen. There is no functional auction
market in any of the municipalities so that farmers depend on middlemen for selling
their animals. Barrio agents buy and gather the animals in a certain area and wait
for the traders who have their own trucks to haul the animals. About 34% of the
cattle are shipped to the mainland through the Calapan port.

2.7.3 Auction Market

From Oriental Mindoro, the live animals are either exported to Region IVA and the
National Capital Region for slaughter or to the Padre Garcia LAM (Section 4.4.1) to
be sold to feedlot operators, if animals weigh less than 200 kg.

2.7.4 Slaughterhouse
Slaughterhouses in the province are classified as A which means that meat is only
for local trade. There are no cold storage so that animals are slaughtered early in
the morning and sold as fresh meat in the wet market. Sixty six (66) percent of
fattened animals in the province are slaughtered locally.
.
2.7.5 Feedlot Operators
Live animals are also sold to feedlot operators in other regions who fatten them for
a certain period of time before selling to meat processors or retailers. Due to limited
time, no data was obtained to quantify this.

2.7.6 Retailers
A big portion of beef is sold in wet markets and supermarkets. Only a small portion
is processed.

2.7.7 Consumers
At present, consumer preference on quality of beef is not much a question. Per
capita consumption of beef in the province is only 1.56 kg in 2000, as per personal
communication with the Provincial Agricultural Statistics Officer of Oriental Mindoro.
This is the latest data available, but it could have increased with the changing
lifestyle of people.

2.7.6 Stakeholders
The DA is the primary stakeholder of the beef cattle chain. With its mission to
increase income and decrease poverty incidence in the rural areas, the Department
through its different agencies greatly influence the beef cattle chain.

Through the Regional Field Unit (RFU) -4B, it provides artificial insemination and
dispersal programs and forage seeds distribution for pasture establishment, in
coordination with the Bureau of Animal Industry (BAI). Disease control is being
taken cared of by the Regional Animal Diagnostic Laboratory (RADDL).

Research on production, mainly focused on nutrition and crop-livestock integration

is being carried out by the Research Division, in coordination with the Bureau of
Agricultural Research.
Trainings on new technologies are provided by the Agricultural Training Institute
(ATI).
10
The DA through the Agriculture and Fisheries Modernization Act of 1997 has
created the Bureau of Agriculture and Fisheries Food Products Standards (BAFFPS)
to centralize monitoring of food products to meet food safety standards.
Furthermore, safety of meat products is being monitored by the National Meat
Inspection Services (NMIS).

Since Oriental Mindoro is an island province, entry and exit of live animals are being
strictly monitored by the Livestock Quarantine Office. Foot baths and other
quarantine measures are strictly implemented.

The Office of the Provincial Veterinarian (OPV), which is under the Local
Government Unit (LGU) of Oriental Mindoro, is in-charge of promoting livestock
industry in the province, particularly, through research and extension.

2.8 The PEST Environment

2.8.1 Political
Oriental Mindoro is part of Region 4B, also known as MIMAROPA region.
MIMAROPA was created on May 17, 2002 under Executive Order 103. The region
was formerly a part of Region 4 or the Southern Tagalog Region, which was the
largest and considered the prime region of the country due to its size and population.
The separation of the two regions (MIMAROPA and CALABARZON) was done to
accelerate the social and economic development of the provinces and cities
comprising the region and to improve delivery of services. MIMAROPA is composed
of 5 island provinces, 2 cities and 71 municipalities (DA-RFU IVB Regional Profile,
2003).

The Local Government Unit, as the main governing body of the province, has the
power to implement laws. As far as the livestock sector is concerned, strong support
is given to the Office of the Provincial Veterinarian, in terms of logistics and financial
support.

2.8.2 Economic
The province is primarily an agricultural area. It is known as the rice granary of the
Southern Tagalog region. Other chief farm products include coconut, corn, citrus
and banana. Livestock raising is also a main agricultural industry.

With regards to infrastructure, national highways are upgraded and major roads that
link rural barangays have been constructed to facilitate delivery of goods and
services. Calapan port is the main gateway to Oriental Mindoro, facilitating the
transport of passengers and agricultural products to CALABARZON and Metro
Manila. Calapan Airport accommodate light planes, like SEAIR for air transportation.

In May 2003, the Strong Republic Nautical highway was made available for
transport of goods to the Visayas and Mindanao provinces. With this giant step of
transporting goods, including live cattle, progress and development is not far behind
for Oriental Mindoro.

2.8.3 Socio-cultural
An ethnic group, called Mangyans, are still found living in the hilly areas of the
province and their main occupation is agriculture. Generally, people of Oriental
Mindoro have simple lifestyle but are hard-working.
11
2.8.4 Technical
Oriental Mindoro is being considered as the seat of DA-RFU 4B, among the other
provinces of the Region due to its proximity to Metro Manila. It has its satellite office
in Calapan which makes it easier to deliver agricultural services to farmers, both in
research and extension. It is also the seat of the Agricultural Training Institute (ATI)
which is responsible for training farmers, technicians and researchers on new
technologies

The Mindoro State College of Agriculture and Technology (MinSCAT) has been
playing a major role in educating young people geared towards improvement of
agriculture and technology.

12
 CHAPTER 3. RESEARCH FRAMEWORK OF FIELD STUDY

3.1 Study Area

Oriental Mindoro is one of the island provinces of the MIMAROPA Region. It is 140
kilometers south of Manila and could be reached by ferry boats from the
international port of Batangas. It is divided into 2 congressional districts, District I
with 8 municipalities and District II with 7 municipalities. Total population as of
August 1, 2007 is 735,769 (NSO, 2007). The province is primarily an agricultural
area. Livestock raising is considered as one of the major sources of livelihood for
rural households.

Based on the recommendation of the Office of the Provincial Veterinarian (OPV),

the study was done in the two congressional districts, considering two top beef
cattle producing municipalities per district (Table 3 and Appendix D).

Table 3. Study Areas

District Municipality Distance to Distance to Manila

Calapan City (km) (km)
I Calapan City 150
Naujan 32 182
II Bansud 90 240
Bongabong 101 261

3.2 Method of Data Gathering

The research was done by means of desk study, a survey to assess the beef cattle
marketing system in the province and 3 case studies.

A courtesy call to the Local Government Unit, through the Office of the Provincial
Veterinarian (OPV) and the office of the Provincial Agriculturist (OPA) was done to
inform the Offices about the conduct of the research. Coordination with the City
Veterinarian of Calapan and the Municipal Agricultural Officers (MAO) of the
respective municipalities was done through phone calls.

A total of forty-one beef cattle raisers were randomly selected and interviewed, at
10 farmers per municipality of Naujan, Bansud and Bongabong, and 11 farmers
from Calapan City.

Three case studies were also done. A case study on the successful marketing
system of Padre Garcia, Batangas was facilitated by interviewing the MAO and the
Planning Officer together with five staff to obtain insights of how livestock formal
market has to do to the success of a beef cattle industry. A Marketing Specialist
from the Bureau of Animal Industry was, likewise, interviewed as a key informant.

Batangas is a province of the CALABARZON Region, which is the mainland part of

the Southern Tagalog Region (Appendix C). MIMAROPA is the island part (Section
5.4.4.1)

13
In another case study, at least 3 middlemen from Oriental Mindoro and 1
middleman from Padre Garcia were interviewed to determine their participation in
the chain.

The third case study was done on the local government unit, as represented by the
Provincial Veterinary Office to determine plans and priorities in relation to beef cattle
marketing and the constraints and opportunities of establishing a livestock formal
market.

3.3 Data Analysis

Data were clustered according to the two congressional districts of the province.
Descriptive statistics of the SPSS program was used. To compare relationship of
the clusters against different variables as level of satisfaction on pricing, choice of
marketing channel, source of market information, perception on importance of
middlemen and need for formal market, chi-square test was used. Independent t-
test was used to compare number of years of experience, number of animal raised
and income.

Qualitative analysis was done for results of desk study and interviews.

14
 CHAPTER 4. RESULTS OF FIELD STUDY

4.1 Demographic Data

Data on the number of years the farmers have been involved in cattle fattening, the
number of cattle raised and income per head of animal were derived from the
survey to compare with the results of the desk study.

Table 4. Distribution Table for No. of Years in Cattle Fattening

No. of Years Frequency Percentage Cumulative

Percentage
<3 10 24.4 24.4
3–5 16 39.0 63.4
6 – 10 15 36.6 100.0
Total 41 100.0 100.0

Table 4. shows that 39% of the respondents have been into cattle fattening for 3 – 5
years while 36.6% have been engaged in the business for 6 – 10 years and 24.4%
have just started for less than three years. Comparing the 2 Districts, results are
not significant ( Appendix F ).

Table 5. Distribution Table for No. of Cattle Raised

No. of Cattle Frequency Percentage Cumulative

Raised Percentage
1 – 2 head 10 24.4 24.4
3 – 5 head 21 51.2 75.6
6 – 10 head 5 12.2 87.8
>10 5 12.2 100.0
Total 41 100.0

Results show that 51.2% of the respondents raise 3 -5 head cattle, 24.4% have only
1 – 2 head, 12.2% raise 6 – 10 head and also 12.2% raise more than 10 head,
respectively (Table 5) and which is not significantly different between the Districts
(Appendix F).

Table 6. Distribution Table for Income per Head of Cattle

Income per Head Frequency Percentage Cumulative

Percentage
P1000 – P3000 6 14.6 14.6
P3001 – P5000 7 17.1 31.7
P5001 – P7000 8 19.5 51.2
P7001 – P10000 15 36.6 87.8
>10000 5 12.2 100.0
Total 41 100.0

15
Table 6 shows that 36.6% of the respondents claim that income per head of cattle
ranges from P7001 – P10000 while 19.5% earns P5001 – P7000. The rest have
incomes ranging from P1000 – P3000 (14.6%), P3001 – P5000 (17.1%) and 12.2%
only earns an income of more than P10000.

4.2 Problems in the Beef Supply Chain

30,0%

District
Percentage of respondents

District I
District II
20,0%

10,0%

0,0%
pricing breeds of lack of capital lack of new
cattle pasture area technologies

Figure 2.Problems incurred by farmers

Results (Figure 2 and Appendix G ) show that the most common problems
identified by farmers in District I are pricing of animals (24%), breeds of cattle (24%),
lack of pasture areas (19%), capital (19%) and lack of new technologies (14%). On
the other hand, 10%, 30%, 25%, 20% and 15% of the respondents in District II
identified the same problems, respectively.

From the case studies done, problems identified are decreasing cattle population
and peace and order situation in some areas.

16
4.3 The Beef Cattle Marketing System in Oriental Mindoro

4.3.1 Marketing of Beef Cattle

60,0%
District
Percentage of respondents

District I
District II

40,0%

20,0%

0,0%
picked at farmer's site by picked at farmer's site by buyers
middlemen
Figure 3. How Cattle is Marketed

Fifty-seven (57) percent and 70 % of the respondents in District I and II, respectively,
market their cattle using middlemen while only 43% and 30%, respectively, depend
on direct buyers(Figure 3 and Appendix H). There is no significant difference in the
marketing channel employed among the two Districts (Appendix L ) which means
that the marketing system using middlemen is favored by farmers in the whole
province.

4.3.2 Marketing Facilities or Structures

n a case study done with the Office of the Provincial Veterinarian, in the persons of
the Assistant Provincial Veterinarian and the Market Specialist II, it was learned that
there are 3 non-functional auction markets, located in Calapan City, Victoria and
Bansud.

4.3.3 Costs Incurred in Marketing Cattle

According to livestock traders, transporting live cattle from the farmers’ sites to the
port of Calapan City and finally, to Metro Manila would entail them P1350 – P19501
per animal, broken down as follows:

Documents/Permits (P150)

Barrio agents port Ship fare (P1000)

(P300 – P500)
Other expenses (P200 – P300)

17
1
Philippine peso to euro exchange rate is P1= 66.897e ( September 5, 2008).
4.3.4 Source of Market Information

80,0%

District
Percentage of respondents

60,0% District I
District II

40,0%

20,0%

0,0%
middlemen/traders farmers
Figure 4. Source of market information

Figure 4 and Appendix I show that market information, particularly, on pricing is

generally, coming from either the traders or farmers. In District I, 52% of the
respondents claimed that they get information on prices from other livestock farmers
while 48% are informed through middlemen. In District II 80% said information is
obtained from middlemen. There is a significant difference on how market
information is obtained by farmers in the 2 Districts (Appendix L).

From interviews with middlemen, pricing of live animals is based on the prevailing
price of carcass in the market and the average dressing percentage of the animals.
With a 50% dressing percentage (PASO,2008), a 200 kg cattle will have a selling
price of approximately P16,500.00 if the prevailing carcass price per kilogram is
P165.00.

18
4.3.5 Role of Middlemen

50,0%

Percentage of respondents
40,0% District
District I
District II

30,0%

20,0%

10,0%

0,0%
strongly agree agree neutral
Figure 5. Perception of farmers on
importance of middlemen
__

Figure 5 and Appendix J show that majority of the livestock farmers in both
Districts I and II agree on the importance of middlemen. Only 19% and 30% of the
respondents in Districts I and II, respectively, believe that middlemen are not
important in marketing their cattle. This perception is not significant between the 2
Districts (Appendix L) which means that farmers in the whole province believe that
middlemen are important.

4.3.6 Role of Government in Beef Cattle Marketing

At present the OPV’s major concern in terms of cattle industry improvement is
increasing production. With increased production, possibility of strengthening the
auction markets in the province is considered. This is contrary to the belief that
marketing system have to be enhanced first to convince farmers to increase beef
cattle production. However, the OPV strongly adhere to the importance of formal
markets to help cattle farmers increase their margins and have more access to
market information.

Livestock marketing is an important component of the livestock industry. On the

national level, one of the measures to address marketing problems was the
issuance of Administrative Order No. 16 Series of 2004 providing for the framework
on the implementation of LAMs in the country. The BAI is the major implementer of
the program.

As of October 2006, there are 157 LAMs established in strategic areas in the
country, of which one hundred nine (109) are operational, forty-four (44) are non-
operational and one (1) was converted to a slaughterhouse. Twenty-four (24) LAMs
need upgrading and repair of facilities. Of the 44 non-operational markets, 15 fall
under the status of “dead markets”2.

2
19
Dead markets are LAMs which have been non-operational for years and structures have been
dilapidated or transformed into other facilities.
4.4 Need for a Formal Market

50,0%

Percentage of Respondents
40,0% District
District I
District II

30,0%

20,0%

10,0%

0,0%
strongly in- in-favor quite in-favor not in-favor
favor
Figure 6. Perception of farmers on need
for formal market

Results show that most farmers in both Districts are in-favor of having a livestock
formal market (Figure 6 and Appendix L ). Only 19% and 15% are quite in-favor in
Districts I and II, respectively and 9% and 10% are not in-favor. But this does not
show a significant difference in the perception of farmers in both Districts.

4.4.1 Benefits of a Livestock Formal Market

To be able to determine the benefits of a livestock formal market, a case study was
done in the Padre Garcia LAM, located in the CALABARZON Region. This LAM is
the largest in the whole Philippines. Every market day, approximately 1,200 cattle
are brought, of which 80% are sold. Weekly income is about P115M from sales of
animals including carabao, horses and goats coming from different regions, like,
MIMAROPA, Bicol, Ilocos, Cagayan Valley and Central Luzon (Appendix C) and
other adjacent municipalities.

The benefits of a livestock formal market, based on actual experiences of farmers

and traders doing transactions at the Padre Garcia LAM are access of farmers to
resources, support services and modern infrastructure, proper documentation of
animals which lessens the fear of buying stolen animals, encouragement of farmers
to increase production and farm income, wide choices of animals for buyers and fair
trading between sellers and buyers.

4.4.2 Problems Encountered by a Livestock Formal Market

Still based on the case study conducted, source of funds for establishment and
rehabilitation of the market is the most common problem. In the case of the Padre
Garcia LAM, they have sourced P 1.5M each from the Congressional Oversight
Committee on Agriculture and Fisheries and Modernization (COCOFAM) and the
Livestock Development Council (LDC) for the upgrading of weighing scales, repair
of railings, loading and unloading ramps, corrals and animal shed. At present, the

20
LGU has a pending proposal for the Agricultural Competitive Enhancement Fund
(ACEF) for the continuous modernization of the LAM.

One of the negative impacts of LAMs is the effect on the environment. If not
properly taken cared of, the wastes will increase with the increase in the volume of
animals brought in the market. Moreover, possibility of traffic congestion is expected
due to added trucks of traders coming in the area.

4.4.3 Requirements for Establishment of a Formal Market

According to Administrative Order #16 of the Philippines, the following are the
criteria for establishment of livestock formal market:

1. A centrally located livestock producing area with good transport facilities;

2. A livestock market originally holding sales or pooling place;
3. Interest and willingness of local official to establish a livestock auction market;
4. Support of the LGUs towards continuous livestock production;
5. Must be at least 25 kilometers away from the nearest accredited livestock
auction markets with a different market day.
6. The LAM should be established away from the slaughterhouse (A.O. 32)
7. Availability of funds for the construction of the LOM facilities.
8. The project site should be owned by the LGU’s, Cooperatives or NGO’s.
9. Should implement R.A. 7394 [Consumer Act] and R.A. 8485 (Animal Welfare
Act)
10.The LGU can create a Livestock Marketing Superintendent position to oversee
the operation of the LAM.

21
 CHAPTER 5. DISCUSSION OF RESULTS

5.1 Demographic Data

Based on the results (Tables 4 - 6 and Appendix F), there are no significant
differences in the number of years in cattle fattening, number of cattle raised and
income per head of cattle between District I and District II. This implies that the beef
supply chain in the province is mainly run by smallholder cattle farmers who raise
3 – 5 head although majority of them have been raising cattle from 3 – 10 years
already. It also shows that cattle farming has really been a part of the agricultural
system in the province.

Income per head is P7000 – P10,000 per head, which is generally fattened for 2 –
3 years. Cattle fattening has been tied to the farmers’ way of life so that it has
become an easy way of earning cash. As described in the supply chain, Oriental
Mindoro employs a rice-based farming system so that feeding of animals is
basically from the rice by-products and other improved forages.

5.2 Influence of the Beef Cattle Supply Chain on Marketing

From Table 2, showing the number of cattle shipped-out monthly, it could be

deduced that there is a constant supply of live animals in the province, although it
has been mentioned by the PVO that one problem associated with marketing is the
dwindling cattle population. It could also be seen that selling of cattle is highest in
the months of June – August which is in time for school fees of children. This trend
could be an indicator of the production cycle the farmers may employ. However, it
should be important to note that increasing the productivity of the animals is the
most efficient way of producing more meat by doubling the yield of meat per animal
than by increasing the number of animals (Bender, 1992).

The beef cattle supply chain in the province is fragmented in that each actor
functions separately. A link between farmers and traders have been established
( Section 4.3.5 ) but not between the farmers and the consumers. Urban (1991)
describes vertical coordination as industrialization by which consumers’ wants and
needs are fed back into a production and distribution system to provide the desired
quality, availability and prices of food products.

5.2.1 Stakeholders of the Chain

The Department of Agriculture, together with the LGU, has a major role in the
improvement of the chain. Although it has been working to improve the marketing
system through the Bureau of Animal Industry, more concern is given to the
production by provision of new technologies through research and extension.

Farmers have not grouped into organizations or cooperatives which could have
contributed to the strength of the chain. Bosc. et.al (2002) cited that cattle producers
should approach production and marketing as teams, creating alliances that can
capture higher prices and profitability, decrease exposure to market risks and
volatility and help producers to respond to competition from other protein sectors.

5.2.2 Problems Incurred in the Chain

The most common problems identified by the farmers are also some of the
problems of the beef cattle production in the Philippines identified by Castillo ( 2000).
22
The most common problem identified is lack of improved breeds. According to
Castillo, this is due to inefficient cattle breeding management and marginal quality
of existing stock. At present, intensification of artificial insemination is being done by
the Department of Agriculture.

Decreasing areas for pasture was also identified by the farmers which conforms
with the information shared by the PVO during the case study conducted. One
reason for this is the Comprehensive Agrarian Reform Program (CARP). The
CARP was formulated into law in 1988 through Republic Act 6657 to distribute
agricultural lands to qualified landless farmers. The law states that landlords have to
retain only 5 hectares and 3 hectares for each heir and the rest are bound for
distribution. Consequently, pasture areas have decreased and many landowners
are selling their lands.

Problem on unstable prices, still according to Castillo is due to inadequate market

information. This could also be explained by the dependency of farmers on
middlemen for source of market information( Section 4.3.4).

Farmers lack capital to increase the number of animals they are raising. Most
farmers are depending on the “paiwi” system described in Section 2.7. According to
Castillo, livestock loan programs are characterized by stringent lending policies and
procedure, especially those pertaining to collateral requirements, interest rates and
repayment period.

With the focus of the LGU on improving cattle production, some farmers still
identified lack of new technologies as one of the problems, which is in contrast to
the report of Castillo that farmers are not very receptive to new recommended
production technologies.

5.3 The Beef Cattle Marketing System in Oriental Mindoro

5.3.1 Marketing of Beef Cattle

Figure 3 and Appendix H show that marketing of beef cattle by backyard raisers
has two major channels. One is, direct buying of consumers who go to the farmers’
area, where they have the chance to choose and pick the kind of animal they want
based on the price asked for by the farmer. There are only a few of these buyers
since the animals are slaughtered locally and most of the time, payment is delayed.

The other channel involves cattle participation of traders from the Southern Tagalog
and National Capital Regions (Appendix C) who go directly to the farmers’ place to
pick-up their cattle through an agent that gathers the animals in one place in the
barangay or municipality. These traders have their own vehicle or truck. The agents
are given P300 – P500 per head.

Farmers in both Districts prefer to sell their animals using middlemen because no
additional costs are incurred on their part. Since farmers raise only 3 – 5 animals,
transporting these animals to Calapan City or the mainland would entail them
additional costs and time. Further, there are risks in transporting animals, like
shrinkage, death or even inferior carcass quality (ENTREPinoys, 2008). According
to the farmers, they have trusted these traders who pay them on cash basis.

A study conducted in China by Gong, et. al (2007), showed similar results. It was
found out that choice of marketing channel is affected by the number of animals
23
sold by farmers and method of payment. Farmers who have a small number of
cattle to sell have relatively low bargaining power and tend to use the spot markets
or intermediaries. At the same time, the farmers who chose to sell cattle through
direct sales were subjected to payment delays so that they sell through
intermediaries since payments are generally received immediately by farmers.

5.3.2 Marketing Facilities or Structures

The 3 livestock auction markets in Calapan City, Victoria and Bansud were
established May 1989, December 1983 and September 1978 (BAI, 2006 ). These
structures have been non-functional for almost 15 years and are now considered as
“dead markets”, from personal communication with Mr. Lary Nel Abao, Senior
Agriculturist of the Marketing Development Division of BAI. Operation of these
markets have not been sustainable due to less volume of animals being brought
regularly and changes in leadership in LGUs wherein support for LAMs are not the
priority.

Although the local government adheres to the importance of a livestock formal

market it seems it is not its priority. More effort is given to increasing livestock
production through introduction of new livestock production technologies and
disease prevention. They believe that with the Strong Republic Nautical Highway,
cattle marketing would be enhanced, just like any other agricultural products of the
province.

5.3.3 Costs Incurred in Marketing Cattle

In marketing cattle in the province, it shows that costs incurred are shouldered by
middlemen or traders which proves why livestock farmers have chosen the
marketing channel using middlemen ( Section 5.3.1 ).

Most livestock traders have their own trucks to ferry the animals, mostly a 30 to 50-
head capacity truck. Expenses on gasoline depend on the distance of the
municipality from the port. Further, other expenses refer to payments given to
“cowboys”3 which has been an acceptable practice in the system to facilitate easy
crossing to borders. This contributes about 15% of the total transaction costs. This
practice is similar to the livestock trade in the West Africa. However, illicit costs
contribute only 1 – 3% of the total transaction costs (Quarles van Ufford, et.al, 1995).

Still according to these traders, their net return per cattle is only P500 – P1000 with
the risks they have to bear during the transport. They have to have enough capital
to maximize their stay in the island, and at the same time, they have to utilize barrio
agents to facilitate less time for purchase of animals.

5.3.4 Source of Market Information

Pricing of cattle, as the most common practice in the Philippines, is through eye
estimates. There are no available weighing scales to have exact weights of animals.

The difference in how information is obtained by the 2 Districts (Appendix L) could

be attributed to their location. Farmers could be well-informed in District I due
to its nearness to the port and to their access to information from the Office of the
City and Provincial Veterinarian. Farmers in District II usually depend on traders
saying that prices in the mainland are low. Most often, they just have to rely on this
information to have a quick disposal of their animals which give them less
opportunity to negotiate prices.

3
Cowboys refer to people who contribute to illicit24
expenses incurred by traders, including ship
employees, policemen, etc., who help facilitate easy crossing to borders.
Market information is important to enable farmers to make rational and relevant
decisions and strengthen their negotiating ability during transactions with buyers
and consequently prevent possible exploitation by better informed buyers
(Musemwa, et. al., 2008)).

5.3.5 Role of Middlemen

Middlemen play a major role in the marketing of cattle in Oriental Mindoro. It has
been found out that livestock farmers have really become dependent on middlemen,
as what has been mentioned by the Market Specialist of the OPV during the case
study conducted. According to the farmers, with middlemen they could easily sell
their cattle without spending much time and money. They also believe that these
middlemen do not get too much profit from selling their animals.

In the Philippines, and even in many developing countries, middlemen are generally
considered less beneficial to farmers as mentioned in many literatures. In an island
province, like Oriental Mindoro, farmers have trusted middlemen as what has been
perceived in Zimbabwe (KIT and IIRR, 2008) and in Cambodia (Neou, 2007).
Farmers could not afford the costs incurred in shipping their animals to the mainland.
Further, even if they would sell their animals locally, transportation costs are also
expensive, also considering the poor farm-to-market roads in some areas. Trust and
transparency have already been established between the livestock farmers and the
middlemen.

Similarly, at the Bodeja market in Ibudan, Oyo State in Nigeria, middlemen stand as
surety for a buyer, in which cattle can be sold on credit and such credit process is
based on mutual trust between producers and middlemen on the one hand and
between middlemen and buyers on the other hand (Filani, 2005).

5.3.6 Role of Government in Beef Cattle Marketing

According to the BAI report (2004), the LAMs have done much to improve the
system in livestock marketing. Its technical contribution particularly had paved the
way towards better price for good quality animals, hence, increased profitability of
producers. This has helped in increasing awareness among livestock raisers to
shift from raising natives to upgraded breeds. Moreover, inspection and issuing of
veterinary health certificates in LAMs helped farmers become aware of their
medication/vaccination programs for their animals. For its socio-economic
contribution, the convenience of buying/selling at the LAM has encouraged farmers
to channel back livestock production as a source of income. It has also helped
increased the income of the municipalities operating the livestock auction market as
discussed in Section 4.4.1.

5.4 Need for a Formal Market

According to farmers, in formal markets, there will be standard prices for their cattle
and these prices may be fair between them and the traders since weights of the
animals will be determined by weighing.

Further, the middlemen/traders were similarly agreeable of a formal market in the

province. According to them, with a formal market they do not have to pay barrio
agents and costs for gasoline expenses would be reduced. They would also have a
fair opportunity to select from different kinds of animals. A systematic and
convenient transaction will shorten the trading time and enable the traders to
engage in other activities.
25
The OPV strongly adheres to the importance of formal markets to help cattle
farmers increase their margins and have more access to market information.
However, the dwindling cattle population in the province is the primary reason why
livestock formal markets are not successful in the province.

Since the 1990s, many commercial farms have stopped operation due to
insurgency problems. Revolutionary taxes are being asked from commercial farm
owners which resulted to transfer of cattle producers to other provinces.

The decreasing population of cattle could also be accounted to decreasing areas for
pasture due to the Comprehensive Agrarian Reform Program (CARP) of the
government as described in Section 5.2.2. Furthermore, inheritors of cattle farmers
are becoming less interested in cattle farming and many have preferences on non-
agricultural activities.

Another reason for the failure of auction markets in the province is the traditional
cattle marketing system employed. Farmers have become dependent on
middlemen or traders.

5.4.1 Benefits of a Livestock Formal Market

Results of the case study showed that having a marketing venue, livestock farmers
have been encouraged to increase production up to 10% and farm income to 30%.
This goes with the statement of Musemwa, et. al. (2007) that with an improved
marketing system, small-scale farmers could go to commercial farming and earn a
higher income.

With the centralized marketing system, the problem of marketing stolen animals are
prevented with the implementation of proper documentation.

Livestock farmers, traders and the LGU all benefit from the formal market. The local
livestock farmers whose income mainly depend on livestock production can now
access to all the resources, support services and infrastructure the auction market
will provide. With that volume of animals being traded every market day, traders
from different provinces are assured of selling and buying animals everyday. And
with facilities available, there would be a fair transaction between the seller and the
buyer. The LGU, in turn, benefits from the taxes and tariff collected in the business
transaction.

Other indirect benefits include job opportunities for scavengers and out-of-school
youth. Scavengers segregate bio-degradable and non-biodegradable wastes.
Recyclable wastes are being sold and serve as additional income for them. The out-
of-school youth generate additional income by taking care of animals, feeding and
pasturing them while at the LAM. Further, organic fertilizer could be generated from
animal wastes.

5.4.2 Problems Incurred by a Livestock Formal Market

Availability of funds either for the establishment or rehabilitation of livestock markets
is a common problem. However, with the political will and cooperation of different
stakeholders this will have a better solution.
In Oriental Mindoro, environmental problems would not be much a concern since
the volume of animals that would be traded are not so large compared to Padre
Garcia LAM.
26
5.4.3 Requirements for Establishment of a Livestock Formal Market
One of the most important consideration for a livestock formal market is a vibrant
livestock industry. In Batangas province where Padre Garcia LAM is located,
population of cattle alone is 125,373 head as of end of 2005 (Abao, 2006).

Considering the 1,200 head cattle being brought to the LAM every market day
(Section 4.4.1), the 359 head available in Oriental Mindoro monthly is far too less.
However, this is a considerable offtake since these animals come from only one
province while those being sold in Padre Garcia come from different provinces.

For a livestock market to become sustainable, there is really a need for political will.
The LGU should have a head and a heart devoted to promote the livestock industry.
Mayor Amadeo Perez of Urdaneta, Pangasinan cited that “putting up and running a
viable LAM can be a great challenge for both national and local government units
due to bureaucratic red tape. But this obstacle can be hurdled if local officials
themselves who are hosts to such a facility invest in human, physical and financial
resources for its upkeep” (Abao, 2007). Urdaneta LAM is the country’s best
managed auction market.

The success of LAMs in Negros Oriental can be traced to the support given by the
host municipal government, the provincial government, the Bureau of Animal
Industry and the financing arrangement forged among stakeholders, like the
municipalities themselves paying for construction of facilities through credits from
banks. (Abao, 2005).

The LGU shall provide competent personnel who have knowledge and skill for the
efficient operation of LAMs while there should also be technical support services
from other line agencies, like the BAI.

According to Abao (2006), a LAM shall invite more traders so that it becomes a
seller’s market rather than one for buyers. Being a buyer’s market, it holds a
considerable influence in the pricing of animals. On the other hand, by
becoming a seller’s market, the livestock farmers can wield considerable influence
on trading of the animals and hence, obtain more profits.

Good roads and transport facilities, as well as modern communications and

equipments for better information system shall be addressed.

5.4.4 Opportunities in the Province That Contribute to the Improvement of

the Cattle Marketing System
Considering the opportunities identified in the PEST analysis in Section 2.8, the
beef cattle marketing system has a great potential for improvement.

Cattle raising, being one of the major agricultural activities, has been a part of the
farmers’ way of life and that potential for increasing production, together with
productivity, is high considering efforts given by the LGU and the Department of
Agriculture through research and extension services.

Since there are no livestock formal markets, the existence of the Strong Republic
Nautical Highway could help facilitate easy transport of live animals to the mainland.

27
 CHAPTER 6. CONCLUSION AND RECOMMENDATIONS

6.1 Conclusion

The beef cattle supply chain in the province is fragmented, in that each actor
functions separately. The link between farmers and middlemen has been
established but the integration between farmers and consumers is missing.
Problems identified are lack of improved cattle breeds, decreasing pasture areas,
unstable pricing of cattle, lack of capital and lack of new technologies.

The beef cattle marketing system has been characterized as the traditional system
wherein traders from other provinces in the mainland go directly to the farmers’
place to pick their animals through an agent that gathers the animals in one place in
the municipality. Farmers perceived the role of middlemen as important in marketing
their animals since all costs incurred are shouldered by middlemen. Farmers can
save time and money by this traditional practice. Through the years, trust has been
developed. Furthermore, trading in an island province like Oriental Mindoro would
entail a lot of capital, as it would cost P1350 – P1950 to transport a head of cattle to
the mainland, which a farmer raising 3 – 5 head cattle cannot afford.

All stakeholders, including the farmers, middlemen and the LGU, are in-favor of
having a livestock formal market to improve the marketing system. However, it is
evident that increasing production is the priority of the LGU. The LGU believes that
increasing production would enhance the marketing system, in contrast with the
national government which is strongly pushing for establishment of formal markets
to encourage farmers to increase their production (Section 4.3.6). Therefore, efforts
on improving both production and marketing shall then be maximized to develop a
strong beef cattle supply chain in the province.

The success of the Padre Garcia LAM, the Urdaneta LAM and Negros Oriental
LAMs can influence an island province like Oriental Mindoro in revitalizing its cattle
industry. With the need for a livestock formal market being realized, there should
also be a need for strong cooperation between the LGU, the farmers and all other
stakeholders.

Based on the findings, it could be concluded that the cattle marketing system in
Oriental Mindoro is not that inefficient as it was thought to be considering the low
input production practiced by the farmers (Section 2.7.1), the continuous supply or
offtake of live animals (Table 2) and the income the farmers are getting per head of
cattle(Table 6). However, there is still a great potential for a more improved
marketing system.

28
6.2 Recommendations

Based on the assessment of the beef cattle marketing system in Oriental Mindoro,
the following recommendations are made.

1. Strengthening of the beef cattle chain

Cattle production shall be improved by continuous research and extension on new
production technologies. Furthermore, extension officers shall extend more effort in
having discussions with farmers, through Participatory Rural Appraisals, and
empowering them in identification of production and marketing problems and
possible solutions.

A market-oriented production program, that is, an organized and timely breeding

and weaning of cattle, shall be adopted. As such, supply of cattle will be sufficient
and marketing will be sustainable.

Although farmers find middlemen important in marketing their animals, it is

necessary to form into organizations or cooperatives for more economic growth,
social development and empowerment. By being organized, farmers can have the
opportunity to achieve better economies of scale in accessing services, information,
infrastructures and markets.

A research or survey on consumer preference, in terms of quantity and quality, can

be done so that farmers will know what the market demands for beef are. It is also
recommended to create awareness on the implementation of HACCP-compatible
standards on domestic meat output to have market access that will require a
guarantee of food quality and safety to consumers. By this, the link between farmers
and consumers will be eventually realized.

2. Revitalizing 2 Livestock Auction Markets

At least one LAM for each District could be revived to facilitate fair trading between
the farmers and the buyers and increase degree of competition. Bongabong and
Calapan are the most strategic locations, considering that they are most likely the
center municipalities in each District. Inspection of old structures which have been
considered as “dead markets” should be done with the assistance from BAI to
determine the extent of damage and the costs it would incur to revitalize.

Market day for each LAM shall be decided by the LGU, at least twice a month to
accommodate more number of animals. The Municipal Agriculture Office in each
municipality shall make arrangements with the LGU for use of available loading
trucks which will transport the animals to the LAM. Gasoline expenses may be
subsidized by the LGU or may be divided among farmers depending on the number
of animals they will transport.

For funding sources, the Agricultural Competitive Enhancement Fund (ACEF) is at

present available for such kind of agricultural improvement.

3. Long-term Planning
In the long term, with vertical integration having been attained, all stakeholders may
attempt to move towards globalization by proposing an upgraded slaughterhouse
and provision of refrigerated vans to transport good quality and safe meat, thus
reducing transport of live animals.

29
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32
 APPENDICES

Appendix A. Inventory of Beef Cattle by Type of Production, Philippines

Year Backyard % Commercial % Total

2003 2,400,727 93 168,019 7 2,568,746
2004 2,406,475 94 162,435 6 2,568,910
2005 2,365,534 94 158,116 6 2,523,650
2006 2,375,514 94 157,634 6 2,533,148
2007 2,399,849 94 157,619 6 2,557,468
Mean 2,389,620 94 160,765 6 2,550,385
Source: Bureau of Statistics

Appendix B. Volume of Beef Cattle Production (000 MT Liveweight)

Year 2003 2004 2005 2006

Production 258.45 255.98 246.75 238.27

Source: Bureau of Statistics (Philippines)

33
Appendix C. Regional Map of the Philippines

34
Appendix D. Map of the Southern Tagalog Region (IV) Showing the Study
Areas

35
Appendix E. Field Research Questionnaires

E1. Survey Questionnaire

Improvement of Beef Cattle Marketing System in Oriental Mindoro, Philippines

1. Location (Municipality): ____________________________

2. How many years have you been in cattle fattening?

____< 3 years ___11-15 years
____3-5 years ___> 15 years
____6-10 years

3. How many cattle do you raise?

____1-2 head ___6-10 head
____3-5 head ___>10 head

4. How are animals marketed?

___brought to a particular site and transacted with middlemen
___picked at farmer’s site by middlemen
___picked at farmer’s site by consumer/buyer
___delivered to consumer
___others _______________________________________

5. Who determines prices?

___farmer ___middlemen ___others

6. How are prices determined?

___by weight ___eye estimate ___others

7. Where do you get market information?

___from middlemen ___from government
___from farmers ___from other sources, specify__________

8. What is your income per head of cattle?

___ P1,000.00 – P3,000 ___P 7,001.00-P10,000
___ P3,001 - P5,000.
___ P 5,001 - P7,000 ___> P10,000

9. Are you satisfied with the pricing of your animals?

__fully satisfied __satisfied __neutral __less satisfied __not satisfied

10.Are you in favor of a formal market?

__strongly in-favor ___in-favor __neutral __quite in-favor __not in-favor

11.Do you agree that middlemen are important in selling your animals?
___strongly agree ___agree __neutral ___not so much ___not agree

12.What problems do you encounter when marketing your animals?

13. Possible suggestions for the industry

36
E2. Case Study 1 - CALABARZON Beef Cattle Marketing System

1. How many animals are brought to the auction market every market day?
2. How many animals are sold?
3. How is market information determined?
4. What is the monthly/yearly income?
5. From what provinces do the animals come from?
6. What are the benefits and constraints encountered?
7. What support does the government give?

E3. Case Study 2 - Middlemen

1. Where do you get market information?

2. What are costs incurred in marketing cattle?
3. What is the profit per head of cattle?
4. What is your preference : formal or informal market?

E4. Case Study 2 - Local Government Unit

1. What are the available structures and marketing facilities?

2. How is market information transferred to farmers?
3. What are the plans and priorities of the government with regards to cattle
marketing?
4. Is there a possibility of establishing a formal market? What would be the
constraints?

37
Appendix F. Independent Sample Tests Comparing District I and District II

Factors df Sig. (2-tailed)

Years in Cattle Fattening 39 0.539
No. of Cattle raised 39 0.126
Income per Head of Cattle 39 0.825

Appendix G. Distribution Table for Problems Incurred in the Chain

District Pricing Breeds of Lack of Capital Lack of New Total

Cattle Pasture Technologies
Area
Count % Count % Count % Count % Count % Count %
I 5 24 5 24 4 19 4 19 3 14 21 100.0
II 2 10 6 30 5 25 4 20 3 15 20 100.0
Total 7 11 9 8 6 41

Appendix H. Distribution Table for Marketing of Beef Cattle

District Picked at Farmer’s Picked at Farmer’s Total

Site by Middlemen Site by Consumers
Count % Count % Count %
I 12 57 9 43 21 100
II 14 70 6 30 20 100
Total 26 15 41

Appendix I. Distribution Table for Source of Market Information

District Middlemen/Traders Other Farmers Total

Count % Count % Count %
I 10 48 11 52 21 100
II 16 80 4 20 20 100
Total 26 15 41

Appendix J. Distribution Table for Perception of Farmers on Importance of

Middlemen

District Strongly Agree Agree Not Agree Total

Count % Count % Count % Count %
I 9 43 8 38 4 19 21 100
II 7 35 7 35 6 30 20 100
Total 16 15 10 41

38
Appendix K. Distribution Table for Perception of Farmers on Need of a
Formal Market

District Strongly In- In-favor Quite In- Not In-favor Total

favor favor
Count % Count % Count % Count % Count %
I 10 48 5 24 4 19 2 9 21 100
II 7 35 8 40 3 15 2 10 20 100
Total 17 13 7 4 41

Appendix L. Chi Square Tests Comparing District I and District II

Variables Value df Sig. (2-sided)

Problems Incurred 1.464 4 0.833
Marketing Channel 0.730 1 0.393
Source of Market 4.630 1 0.031*
Information
Perception on Role 0.693 2 0.707
of Middlemen
Perception on 1.341 3 0.719
Need for Formal
Market
*significant at 0.05 level

39