“Failure is a success if we learn from it.” — Malcom Forbes
One of the nontariff barriers utilized to protect our local agricultural producers is the classification of our markets into two: supermarket or groceries; and wet market. Through various laws and regulations, the latter is preserved for our local producers because they are supposed to cater to the “masa” consumers who patronize the wet market to buy their food stuff. Further, it is argued that small farmers and fisherfolk mainly supply the food commodities in the wet market and hence, should be shielded from the competition posed by the inflow of imported agricultural products.
The problem is that the precept is anchored on flawed logic. It is the assemblers (or traders) of the produce of the small farmers and fisherfolk who bring the commodities to the wet market. They are by no means poor, in any manner the term is defined, but they are the ones that rake in the bulk of the profit margin when products are sold in the wet market. This accounts for the huge discrepancy between the farm gate prices (received by farmers/fisherfolk), and wholesale prices and particularly, retail prices (obtained by assemblers/traders).
It is no wonder then that any proposal to lower tariffs on imported products is met by a howl of protests from relatively big producers cum traders/assemblers. Such a measure will hurt their pocket, although they hide behind the smokescreen of protecting the interest of the small farmers and fisherfolk.
Shrinking wet market share
Another challenge complicating the maintenance of the policy of protecting the wet market from imported food products is the secular trend toward the “supermarketization” of the market. This simply means that as the economy becomes more developed, the share of supermarkets or groceries (including convenience stores) of the market increases while that of the wet market decreases. We have seen this happen in the United States, Europe and Japan. China, Singapore, Malaysia, among others, in Asia are similarly undergoing such transformation.
A publication by the Asian Development Bank titled “The Quiet Revolution” also noted this phenomenon at work even in the cereals and basic food sectors in a number of Asian countries. In the Philippines, the share of supermarkets of the market is now around 30 percent and is fast rising. The establishment of convenient stories like Alfamart, Ministop, Savemore, FamilyMart, among others, which are now selling even frozen meat and fish products, in various urban and peri-urban areas of the country, will hasten the supermarketization trend.
The obvious implication on the wet market is that its share of the market will further shrink. And what about its impact on our small farmers and fisherfolk? Unless the government integrates them into the supply chain catering to supermarkets or groceries, their income will be further squeezed by assemblers/traders.
The fragmentation of our farms into minuscule sizes due the protracted implementation of the agrarian reform program has prevented the application of modern farming practices and technologies. Our small cultivators cannot afford the cost of these technologies, thus they are in a disadvantageous position vis-à-vis their foreign counterparts. The government can modernize farm production if our farms are clustered or consolidated to allow the efficient use of machinery and technologies. This does not mean consolidating land ownership but necessitates consolidating production through proper scheduling so that economies of scale and a steady supply of the produce can be achieved.
In turn, farm clustering requires organizing our small farmers and fisherfolk into production units capable of responding to market demand for quality and affordable food products.
Particularly, our local government units, which have control of extension workers as part of the devolution of basic services, must invest in efforts to organize our farmers and fisherfolk. This was what China did earlier, and then Thailand, and more recently, Vietnam. Now they have small farmers and fisherfolk capable of competing in the world market.
Undoubtedly, this is the end goal of modernizing our farms. For a start, we should be able to respond first to the challenge of the growing size and requirements of our local supermarkets and groceries. Unfortunately, our small farmers and fisherfolk are ill-prepared to address the needs of these market outlets for quality and affordable food products. Hence, it is imperative that they be properly organized and supported by technologies that can ensure production of a steady supply of quality and reasonably priced products for institutional buyers.
Organized farmers and fisherfolk groups should be provided low-interest credit as supermarkets or groceries procure on a consignment basis. The government can convince big buyers to pay upfront for the delivered produce or shorten the processing time for payment as part of the corporate social responsibility of the firm. But given credit tightness due to the adverse economic impact of the coronavirus disease 2019, government credit support is indispensable for the moment.
If farmers and fisherfolk can directly supply the requirements of supermarkets and groceries, consumers will benefit from lower prices of food commodities. Directly linking the producers to the end point of the supply chain means ridding the system of layers of traders who impose their own profit margin per stage of the transaction chain, thereby jacking up the final retail price.
If farmers and fisherfolk are properly organized, the distinction between supermarket and wet market becomes redundant. The gains are aplenty with better-organized producer groups. Producers can negotiate better prices for their products. Two, assemblers/traders whose profit margins jack up the final price of the goods will be dispensed with. Three, consumers have their pick of lower-priced and quality food products. And four, a more modern and competitive agricultural sector will enable our farmers and fisherfolk to compete with their foreign rivals.