5 Rice value chain in Iloilo Province
5.3 Niche markets
Niche markets enable smallholder farmers to shift from selling to an undiffer-entiated commodity market to selling a differundiffer-entiated product. As niche markets satisfy specific market needs, farmers producing niche products can achieve high-er prices for their commodity and improve their livelihoods. In some regions of the Philippines, for example, the cultivation of heirloom rice varieties as a niche product helps to empower communities (IRRI 2015a).
31 Supply contracts are not always on a monthly basis. Some request weekly deliveries whereas others only want delivery every other or every three months. The amount has been calculated in monthly supplies to achieve comparability.
32 MSI advocates monthly rice allowances to employees as non-wage benefits that can be procured from local farmers and their cooperatives.
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Rice value chain in Iloilo ProvinceIn Iloilo Province, some of the interviewed farmers supply niche markets by selling by-products. Other smallholder rice producers cultivate special rice varie-ties such as purple, red or black rice to enter niche markets. Furthermore, some farmers produce organically to cater to specific demand. The following sub-chapter gives a brief overview of possible niche markets.
Rice by-products
During the different rice processing stages by-products such as rice husk and bran are generated. 100 kg of palay generate about 20 kg of rice husk and about 5-10 kg of rice bran (IRRI 2015b). About 38% of the value chain actors interviewed sell husk to local markets as animal fodder for an average price of 12.4 PHP/kg.
Husk is mostly given for free, used as fuel for driers or processed into organic ferti-lizer.
Case Study: Rice bran brokering
Reynaldo D. does not only work as an agent in palay trading, but he also trades rice bran. He establishes the connection between millers and rice bran traders and usually handles 1,000 sacks per month. The trader buys the by-product from millers and then sells it to piggeries and poultry farms. Currently, the price stands at 700 PHP per sack. Reynaldo considers it to be a really good business since rice bran is scarce.
Many interviewees indicated that there is a steady demand for rice by-products. As down-stream value chain actors usually process the rice, they benefit from this additional income. When a farmer has the palay custom-milled, he/she keeps the by-products or can also use it as an in-kind payment for the milling pro-cess.
Special rice varieties
Some farmers also cultivate special rice varieties such as brown, red, black and purple rice as well as glutinous rice. Farmers and other value chain actors are aware that these varieties are rich in fiber, iron, zinc and protein and are conse-quently healthier for the consumers. Even so, many farmers are reluctant to culti-vate these varieties as they worry about low yields.
Furthermore, the majority of value chain actors believe that there is a low de-mand for these varieties and have not identified Iloilo Province as being an inter-esting market. However, individual farmers sell special rice varieties to retailers or
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directly to supermarkets and universities. This indicates that the niche market for special rice varieties is emerging.
Box 7: Example of a special rice product Purple rice from Ajuy
Photo: E. Kürschner
Packaging and branding add value to special rice varieties such as purple rice.
Organic rice
The Department of Agriculture states that “more farmers are now shifting to organic farming and more consumers now prefer organic products” (Department of Agriculture 2015). Yet, both farmers and other value chain actors state that the consumer demand for organic and special rice, as well as the inclination to pro-duce these niche products is still low.
The market for organic products33 is also evolving in Iloilo Province. In particu-lar people who are aware of healthy diets are interested in consuming organically produced rice. Organic rice is sold at a price of between 60 and 100 PHP/kg at local wet markets (Panay News 2014). Zarraga, a municipality within the BRIA interven-tion area, has recently set up a DA-funded Organic Trading Post to sell organically produced meat, fish, vegetables, fruit and rice. In order to supply the trading posts, farmers need to be certified by a member of a municipal technical working
33 The Organic Act of 2010 “intends to promote, propagate, develop, and further implement the practice of organic agriculture in the country to improve soil fertility, increase farm productivity, reduce farm-source pollution, further protect the health of the farmers, consumers, and the general public, as well as save on imported farm inputs.” (Department of Agriculture 2015)
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Rice value chain in Iloilo Provincegroup.34 At the moment, the trading post only opens three days a week, as there is still a lack of organic products. Longer opening hours are intended for the fu-ture. Furthermore, universities such as the Central Philippine University (CPU) have hosted organic trade fairs.
Some farmers also intend to export niche products, such as organic black rice (Panay News 2014). Additionally, two organic farmers stated that they sell their produce directly to universities, hospitals and restaurants and take orders via so-cial networks.
Case Study: An organic farmer group from Zarraga
Joby A., a farmer from Zarraga, assembled a group of 20 farmers to produce organic rice col-lectively through the System of Rice Intensification (SRI) in order to later export the produce.
In 2014, Joby contacted a company that imports both organic rice, and rice transitioning to organic, of smallholder rice producers to the United States. Together with the company an arrangement was set up to secure the procurement when quantity requirements can be met by the farmer group. By 2016, the group wants to export their first contingent. To achieve the requirements, Joby allocates funds from governmental and non-governmental organizations.
“Farming is easier when you help each other” (Joby A.): the group meets once a week to talk about rice production and challenges. The principle of voluntarism guides the interaction of group members, meaning that when help is needed other group members assist. To process the produce the farmer group wants to make use of the existing assets of individual farmers:
one member has access to a drying facility while another one owns a market stall in Iloilo City to market the produce. Joby manages the communication of the group transparently and in-forms the members on current developments.
When producing for niche markets, farmers face various difficulties. In terms of organic farming, the lack of organic inputs means that they produce their own fer-tilizers. Furthermore, extension workers and training sessions cover conventional farming practices rather than organic farming.
With regard to processing organic rice, drying, storing and milling facilities need to ensure purity and a good processing quality. However, some value chain actors are still hesitant to engage in processing special and organic rice. In the case of certified organic products, most milling facilities cannot be used to process
34 While the certification criteria are the same, local certification is free of charge and official certification at the Organic Certification Center of the Philippines costs about 30,000 to 50,000 PHP/year and is of-ten too expensive for smallholders.
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conventional rice as residues may contaminate the rice. A low demand for niche products hinders the farmer from getting the actual price for the product.