Profitability and efficiency analyses of organic temperate vegetable production in the Philippines

J. Bio. & Env. Sci. 2023
93 | Cabrea et al.
RE
RE
RE
RESEARCH
SEARCH
SEARCH
SEARCH PAPER
PAPER
PAPER
PAPER OPEN ACCESS
OPEN ACCESS
OPEN ACCESS
OPEN ACCESS
Profitability and efficiency analyses of organic temperate
vegetable production in the Philippines
Necitas M. Cabrera*
, Diego A. Waguey
Don Mariano Marcos Memorial State University, Agoo, La Union, Philippines
Article published on April 19, 2023
Key words: Organic temperate vegetables, Profitability, Efficiency, Value chain, Marketing margins
Abstract
This research analyzed the profitability and efficiency of organic temperate vegetable production through the
supply chain approach. Survey, key informant interviews, participant observation and archival research were
used to gather data. Thirty eight (38) producers and 11 traders in the Cordillera Administrative Region (CAR),
Region III and Region IVA served as respondents. Descriptive statistics, cost and return analysis and efficiency
analysis were used to analyze research results. The emergence of new breeds of players makes the marketing
channel of organic vegetables in the CAR complex compared to a simpler, more modern and integrated chain in
the regions outside of the CAR. The six key players in the marketing of organic vegetables are the cooperative,
assembler-wholesaler-retailer, assembler-wholesaler, assembler- retailer, retailer and institutional buyers.
Returns to total expenses were highest for native cucumber, cauliflower, Japanese spinach, broccoli and lettuce
ranging from 100 percent to 235 percent. Native cucumber, cauliflower, Japanese spinach, broccoli, French
beans, and lettuce give higher profits to farmers ranging from 49.00 pesos to 71.00 pesos per kilogram. The
production of cabbage, native cucumber, cauliflower, Japanese spinach, broccoli, French beans, and lettuce
requires low capital, labor and land use intensity indicating high efficiency. Value chain and marketing margin
analyses show cost and margin differentials across players and across geographic locations indicating variations
in the distribution of benefits among key actors. With the premium price that organic products command and
the low capitalization, land and labor utilization needed, organic temperate vegetable production is profitable
and efficient which determine its sustainability in the long run.
*Corresponding Author: Necitas M. Cabrera  nbcabrera@dmmmsu.edu.ph
Journal of Biodiversity and Environmental Sciences (JBES)
ISSN: 2220-6663 (Print) 2222-3045 (Online)
Vol. 22, No. 4, p. 93-103, 2023
http://www.innspub.net

94 | Cabrea et al.
Introduction
The Philippines’ effort to shift from conventional to
bio-organic farming took a serious turn with the
signing in 2010 of Republic Act 10068 otherwise
known as the Organic Agriculture Act of 2010 which
aims to strengthen the State’s policy to promote,
propagate, develop further and implement the
practice of organic agriculture. Through organic
agriculture, community-based organic agriculture
systems are established and organic agriculture
system as a viable alternative is adopted.
Then President Benigno C. Aquino himself
acknowledged that organic farming is the way to go in
food security that would address hunger, sustain health
and environment and develop the country’s niche in
the world market for organic agri-industries. He
recognized that focusing national attention on the
importance of organic agriculture would enhance
global competitiveness and environmental integrity,
increase food security and safety and alleviate poverty.
According to the International Federation of Organic
Agriculture Movements (IFOAM), the Philippines
ranks number 5 among the largest number of organic
producers with 165,958 producers and number 8
among the largest number of hectarage of organic
land with 234,642 hectares, in the world with a
production volume of 525,863 metric tons (IFOAM,
2014). Rice, banana, corn, coconut, sugarcane, and
temperate vegetables were among the first products
to be produced using the natural and organic way.
Being a relatively new product and a relatively new
industry, the supply chain of organic temperate
vegetables has never been analysed to critically
pinpoint where its strengths and weaknesses lie.
It is widely recognized in the agricultural sector that if
farmers are to be competitive in both domestic and
international markets, their supply chains need to be
more efficient and effective. Improving the
competitiveness of a supply chain relies upon improving
the efficiency of all its elements from production,
processing, handling, distribution and marketing.
Previous studies on supply chain of specific
vegetables, like lettuce have highlighted poor
marketing efficiency and erratic prices as
circumstances that aggravated the lot of farmers who
need to borrow capital for production (Fang-asan,
2008). In the Philippines where farming is generally
small-hold and farmers are mired in a vicious cycle of
poverty, farmers need to make profit in order to
remain in production.
Organic vegetable farming in the Philippines is
important to the country’s food security. Organic
vegetables are not only nutritious and free from
harmful chemicals, but they are also more resilient to
pests and diseases. This makes it ideal for small-scale
farmers who cannot afford to use expensive chemicals
on their crops. The future of organic vegetable
farming in the Philippines looks promising with more
and more people recognizing the benefits of eating
organic food. With proper support from the
government and private sector, small-scale farmers
will be able to continue producing healthy, chemical-
free vegetables for Filipino consumers.
While the health benefits of organic farming to the
environment, to farmers and to Filipino consumers,
cannot be overemphasized, it is critical that organic
farming is profitable enough to encourage farmers to
engage in production or to stay in business.
This research intended to determine the profitability
and efficiency of organic temperate vegetable
production and marketing, the marketing channels
and the value chain and marketing margins of each
player in the chain which may encourage farmers to
engage in production improve their social condition
and make the industry sustainable in the long run.
The analysis was focused on eleven (11) commodities,
namely: beans (Phaseolus vulgaris, snap bean and
French bean varieties), broccoli (Brassica oleracea
var. italica), cabbage (Brassica oleracea var.
capitata), carrots (Daucus carota subsp. Sativus),
cauliflower (Brassica oleracea var. botrytis),
cucumber (Cucumis sativus, native and Japanese

95 | Cabrea et al.
cucumber varieties), lettuce (Lactuca sativa, fancy
varieties), pechay (Brassica rapa subsp. oleifera and
Brassica rapa subsp. chinesis), potato (Solanum
tuberosum), spinach (Spinacia oleracea New Zealand
and Japanese spinach varieties) and tomato (Solanum
lycopersicum big and cherry tomato varieties).
Materials and methods
Project Sites and Respondents
The study covered the vegetable producing Regions of
the Cordillera Administrative Region (CAR), Region
III or Central Luzon and Region IV-A or
CALABARZON. The lists of certified organic
vegetable producers were obtained from the Organic
Certification Center of the Philippines (OCCP) and
the Negros Island Certification Services (NICERT).
The lists were updated as of 2013 which also included
those certified in 2011 and 2012 and those in the
process of renewing their certification status. Those
which have ceased operation at the time of the study
were disregarded. Certified, school-based demo-
farms in the lists were not also part of the study.
In the CAR, only two organic vegetable producers are
certified. Only one organic vegetable producer in Region
III is certified and in the CALABARZON area, eleven (11)
farms were in the list. Except for CALABARZON, a
complete enumeration of the certified organic vegetable
producers was obtained. A total of 38 organic producers
(CAR=31, Region III=1, Region IVA=6) and 11 traders
were involved in the study.
Data Collection and Analysis
Survey method was used as the primary data gathering
technique. Both primary and secondary data were
collected and utilized. Primary data were gathered
through survey, personal interviews, key informant
interviews, telephone inquiries/mobile short messaging
systems (SMS)/email communications, participant
observation and ocular inspection. Two (2) survey
instruments were developed to obtain information
from the organic vegetable producers and traders.
Secondary data were requested from both
government and non-government institutions that
included the Department of Agriculture, Agricultural
Training Institute, Bureau of Agricultural Statistics and
Spread Organic Agriculture in the Philippines (SOAP)
To supplement data gathered from the above sources,
archival research and benchmarking were done.
Existing literature available on line were accessed.
These materials were bases of data documenting the
activities of major players of the supply chain like
supermarkets in the absence of primary data as some
interviewees invoked data privacy on the identity of
their regular buyers/customers. Unpublished
materials like flyers, pamphlets and other IEC
materials on conventional production deemed related
to the present study were also considered as sources
of benchmark data and were used to compare data
obtained in the study. Data based on a third party
account of the researcher were also injected into the
discussion, when needed. These included
developments in the industry within the period the
research was conducted until the making of the
research report.
Descriptive statistics like frequency counts,
percentages and means/averages were used to define
and assess organic vegetable production and
marketing systems.. Cost and return analysis was
used to determine profitability. Specific cost items
like depreciation, labor and transportation were
estimated using ratio and proportion. Efficiency was
computed using input-output ratio. To measure the
extent of input utilization in organic vegetable
production, the ratios between production factors and
output were computed per unit area of 50m2 and
2000m2, respectively for CAR and outside of CAR.
The following ratios were used:
a) Capital-Output Ratio (COR) is the ratio between total
cost of production and the value of total output
which implies how intensive capital was used;
b) Labor-Output Ratio (LOR) is the ratio between total
farm labor (in man-days) and total value of output
which implies how intensive labor was used; and
c) Land-Output Ratio (SOR) is the ratio between the
total area cultivated (in square meters) and total
value of output which implies how productive land
was used.

96 | Cabrea et al.
Results and discussion
Key Players in the Chain
In the CAR, marketing associations and cooperatives
composed of organic producers are at the forefront of
the Industry. Some producers perform dual functions
along the chain since they also take active roles in the
marketing of organic produce. Outside the CAR,
corporations are the major players in the industry. These
corporations ventured or diversified into organic
farming for economic, social and health reasons.
There are generally six (6) key players in the chain: input
suppliers, vegetable producers, assembler/consolidator/
integrator-wholesaler-retailers, retailers, institutional
buyers and consumers. Institutional buyers are
composed of hotels, restaurants and cancer
clinics/hospitals.
Input Supply
Farm supply stores sell production inputs like seeds,
fertilizers and pesticides but these are unaffordable,
limited in supply or of poor quality. Seeds sold are not
guaranteed certified organically produced seeds.
Farmers are encouraged to produce their own inputs.
Very few farmers could afford to buy hybrid or
certified seed varieties.
Fertilizers are produced using traditional composting
method, vermicomposting and the use of “Mokusako”
and “Bokashi” Japanese technologies. The intensive
use of effective microorganisms to facilitate the
process was noted.
Pests, insects and diseases are managed and
controlled using botanical pesticides concocted by the
farmers and integrated pest management practices
like crop rotation. Otherwise, pests and diseases are
controlled manually.
Production
In the CAR, production of organic temperate
vegetables is described as a system wherein different
kinds and/or varieties of vegetables are raised in
complement with or intercropped with the other to
maximize the production area. Outside the CAR,
vegetable production is more an integrated system
with the inclusion of fruit trees, root crops, rice,
poultry, livestock and fishery in the production area.
Organic vegetable production in the CAR is
characterized as small-hold with farmers cultivating
an average of 256 square meters of various crops at
one given time. In Regions III and IV-A, area devoted
to organic vegetable production is more than one-
fourth of a hectare (2688.10 square meters), on the
average. This resulted to an average annual
production volume of more than 39MT in the CAR,
23 percent of which is lettuce. During months when
production supply is high, particularly March and
April, a high degree of pull-out or spoilage is incurred
by farmers.
This occurs since the farmers simultaneously harvest
the crops they have planted during the colder months
of the year. In Region III and IVA, annual production
volume was estimated to be more than 380MT, more
than 53 percent of which is also lettuce
For a 50 square meter production area in the CAR
(Table 1), returns to total expenses were highest for
native cucumber, cauliflower, Japanese spinach,
broccoli and lettuce ranging from 100 percent to 235
percent. Net profit per kilogram was highest for
native cucumber, cauliflower, French beans, broccoli
and Japanese spinach ranging from 49.00 pesos to
71.00 pesos.
In terms of input-utilization ratios which measure the
efficiency of organic vegetable production, lower
capitalization is needed to produce these vegetables:
native cucumber, cauliflower, Japanese spinach,
broccoli, lettuce, French beans and cabbage. It
requires only less than 0.50 centavos to produce one
peso worth of output for these vegetables. The
production of native cucumber and cauliflower
requires the least labor among all the crops as shown
by very low labor-output ratios. Since land-output
ratios are less than one (1) for all crops, the
production of organic vegetables in the Cordilleras is
productive in terms of intensity of land utilization.

97 | Cabrea et al.
Table 1. Profitability and efficiency analyses of organic temperate vegetable production (50m2)-CAR.
Baguio/
Snap
Beans
French
Beans
Broccoli Cabbage Carrots Cauliflowe
r
Japanese
Cucumber
Native
Cucumber
Lettuce Pechay
(flowering
)
Pechay
(others)
Potato Spinach
(New
Zealand)
Spinach
(Japanese
)
Tomato
(large)
Tomato
(Cherry)
I. Gross Profit
Yield (kilogram)
Price per kilogram
3539.40
69.4
51.00
8580.75
67.3
127.50
8160.00
80
102.00
8908.00
131
68.00
7639.80
74.9
102.00
15932.40
156.2
102.00
8427.75
66.1
127.50
8884.20
87.1
102.00
3893.00
45.8
85.00
4263.60
62.7
68.00
2427.60
47.6
51.00
5854.80
86.1
68.00
5856.50
68.9
85.00
4768.50
56.1
85.00
12223.00
143.8
85.00
11271.00
110.5
102.00
II. Expenses
Labor a/
Cost of seeds b/
Packaging material c/
Farm rental d/
Depreciation e/
Transportation f/
Contingency g/
Total Expenses
1682.00
140.00
278.00
127.00
207.00
130.00
223.00
2787.00
2407.00
800.00
269.00
134.00
291.00
94.00
357.00
4352.00
2668.00
84.00
320.00
195.00
319.00
100.00
317.00
4003.00
2708.00
84.00
524.00
205.00
334.00
352.00
367.00
4574.00
2973.00
563.00
300.00
196.00
382.00
122.00
395.00
4931.00
3635.00
63.00
625.00
204.00
686.00
170.00
450.00
5833.00
3110.00
600.00
264.00
185.00
658.00
172.00
414.00
5403.00
1370.00
225.00
348.00
92.00
181.00
219.00
216.00
2651.00
1291.00
15.00
183.00
80.00
157.00
58.00
155.00
1939.00
2386.00
5.00
251.00
123.00
234.00
78.00
272.00
3349.00
894.00
5.00
190.00
74.00
93.00
90.00
118.00
1464.00
2211.00
204.00
345.00
185.00
242.00
55.00
281.00
3520.00
3464.00
18.00
276.00
205.00
299.00
120.00
388.00
4771.00
1284.00
18.00
225.00
68.00
212.00
56.00
158.00
2021.00
4712.00
30.00
575.00
185.00
520.00
263.00
559.00
6844.00
4921.00
220.00
442.00
308.00
715.00
247.00
579.00
7335.00
Net Profit (Php) 752.40 4228.75 4157.00 4334.00 2708.80 10099.40 3024.75 6233.20 1954.00 914.60 963.60 2334.80 1085.50 2747.50 5379.00 3936.00
Return to Total
Expenses (%) 27.00 97.20 100.38 94.80 54.90 173.10 56.00 235.10 100.80 27.30 65.80 66.30 22.80 135.90 78.60 53.70
Average Production
Cost (Php/kg) 40.20 64.70 50.00 34.90 65.80 37.30 81.70 30.40 42.30 53.40 30.80 40.90 69.20 36.00 47.60 66.40
Net Profit per
Kilogram (Php) 10.80 62.80 52.00 33.10 36.20 64.70 45.80 71.60 42.70 14.60 20.20 27.10 15.80 49.00 37.40 35.60
Break-even Yield (kg) 54.6 34.1 39.2 67.3 48.3 57.2 42.4 26.0 22.8 49.3 28.7 51.8 56.1 23.8 80.5 71.9
Capital-Output Ratio 0.72 0.47 0.45 0.47 0.59 0.34 0.59 0.27 0.46 0.72 0.55 0.55 0.75 0.39 0.51 0.60
Labor-Output Ratio 0.0019 0.0011 0.0013 0.0012 0.0016 0.0009 0.0015 0.0006 0.0013 0.0022 0.0015 0.0015 0.0024 0.0011 0.0015 0.0017
Land-Output Ratio 0.0141 0.0058 0.0061 0.0056 0.0065 0.0031 0.0059 0.0056 0.0128 0.0117 0.0206 0.0085 0.0085 0.0105 0.0041 0.0044
a- 250 pesos per day
b- Volume of seed per square meter x area planted x price of seed per gram
c- Total production in kilogram x 4 pesos
d- 15 pesos per square meter per year
e- Straight line method, 10 present salvage value
f- Fare or gasoline computed in proportion to total volume of vegetables delivered
g- 10 present of cash cost, excluding farm rental and depreciation; used for fuel & oil, electricity, other supplies like molasses, etc.
In Regions III and IV-A, a 2000 square meter organic
production area (Table 2) proved highly profitable
based on the computed returns to total expenses. For
every peso invested in the production of one kilogram
of cauliflower, lettuce (romaine and xanadu varieties),
broccoli, cabbage and French beans, percentage
returns to total expenses range from 537 to 1175. Less
than 20 centavos is needed to produce a peso worth of
output for these crops indicating low utilization of
capital: Japanese cucumber, French beans, cabbage,
broccoli, lettuce (romaine and xanadu) and
cauliflower. Labor utilization and land utilization
ratios are also low indicating.
Those organic vegetable productions in these regions
are not labor and land use intensive.
Table 2. Profitability & efficiency analyses of organic temperate vegetable production (2000m2)-Regions III & IV
Beans
(Snap)
Beans
(French) Broccoli Cabbage Carrots Cauliflower
Cucumber
(Japanese)
Cucumber
(American)
Lettuce
(Romaine)
Lettuce
(Lollo
Rossa)
Pechay
(Native)
Pechay
(Pakchoi)
Spinach
(Japanese)
Spinach
(New
Zealand)
Tomato
(Small)
Tomato
(Large)
I. Gross Profit
Yield (kilogram)
Price per kilogram
162000.0
2700
60.00
780000.0
2600
300.00
80000.
3200
250.00
780000
5200
150.00
580000
2900
200.00
1550000.0
6200
250.00
312000.00
2600
120.00
272000.00
3400
80.00
680000.0
3400
200.00
315000.
1800
175.00
200000
2500
80.00
152000.0
1900
80.00
264000.00
2200
120.00
324000.0
2700
120.00
880000.
4400
200.00
570000.0
5700
100.00
II. Expenses
Labor a/
Cost of seeds b/
Packaging material c/
Farm rental d/
Depreciation e/
Transportation f/
Contingency g/
Total Expenses
59368.00
3200.00
5400.00
328.00
15472.00
576.00
6854.00
91198.00
59368.00
32000.00
5200.00
328.00
15472.00
384.00
9695.00
122447.0
46914.0
2971.0
6400.0
329.0
13814.0
286.0
5657.0
76371.0
49893.0
0
2973.00
10400.0
0
493.00
38680.
0
36550.0
2100.00
5800.0
650.00
193400.
400.00
4485.00
243385.
51050.00
2250.00
12400.00
325.00
48350.00
600.00
6630.00
121605.00
42689.00
7800.00
5200.00
244.00
6449.00
440.00
5613.00
68435.00
42947.00
7800.00
6800.00
329.00
8596.00
249.00
5780.00
72501.00
44660.00
553.00
6800.00
247.00
1451.00
441.00
5245.00
59397.00
51308.0
1430.00
3600.0
219.00
5784.00
1370.00
6270.0
69981.0
34575.0
175.00
5000.00
115.00
1693.00
173.00
3992.00
45723.0
34775.00
175.00
3800.00
115.00
3385.00
190.00
3894.00
46334.00
71300.00
633.00
4400.00
111.00
7522.00
189.00
7652.00
91807.00
71689.00
633.00
5400.00
167.00
10744.00
1222.00
7894.00
97749.00
53700.00
450.00
8800.00
650.00
193400.0
700.00
6365.00
264065.0
38950.00
150.00
11400.00
350.00
96700.00
400.00
5090.00
153040.0
Net Profit (Php) 70802.00 657553.0 723629.
670941.
0
336615. 1428395.0 243565.00 199499.00 620603.0 245019. 154277. 105666.0 172193.00 226251.0 615935.0 416960.0
Return to Total
Expenses (%) 77.6 537.0 947.5 615.2 138.3 1174.6 355.9 275.2 1044.8 350.1 337.4 228.1 187.6 231.5 233.3 272.5
Average Production
Cost (Php/kg) 33.80 47.10 23.90 21.00 83.90 19.60 26.30 21.30 17.50 38.90 18.30 24.40 41.70 36.20 60.00 26.80
Net Profit per
Kilogram (Php) 26.20 252.90 226.10 129.00 116.10 230.40 93.70 58.70 182.50 136.10 61.70 55.60 78.30 83.80 140.00 73.20
Break-even Yield (kg) 1520.0 408.2 305.5 727.1 1216.9 486.4 570.3 906.3 297.0 399.9 571.5 579.2 765.1 814.6 1320.3 1530.4
Capital h/-Output
Ratio 0.52 0.14 0.09 0.13 0.41 0.07 0.20 0.35 0.08 0.22 0.21 0.28 0.32 0.28 0.29 0.26
Labor-Output Ratio 0.0013 0.0003 0.0002 0.0002 0.0002 0.0001 0.0005 0.0006 0.0002 0.0006 0.0006 0.0008 0.0010 0.0008 0.0002 0.0002
Land-Output Ratio 0.0123 0.0026 0.0025 0.0026 0.0034 0.0013 0.0064 0.0074 0.0029 0.0063 0.0100 0.0132 0.0076 0.0062 0.0023 0.0035
a- 306 pesos per day for labourer and 40,0000 pesos monthly for farm manager in Region III
250 pesos per day for labourer and 10200 pesos monthly for farm manager in Region IVA
b- Volume of seed per square meter x area planted x price of seed per gram
c- Total production in kilogram x 4 pesos in Region III and 2 pesos in Region IVA
d- 0.65 pesos and 1.00 peso per square meter per year in Region III and IVA, respectively
e- Straight line method, 10 present salvage value
f- Fare or gasoline computed in proportion to total volume of vegetables delivered
g- 10 present of cash cost, excluding farm rental and depreciation; used for fuel & oil, electricity, other supplies like molasses, etc.
h- Total cost less contingency
Marketing
The marketing of organic vegetables in the CAR (Fig.
1) involves a complex chain of intermediaries as a
result of the emergence of new breeds of traders from
the traditional chain who oftentimes perform
overlapping functions. The La Top (La Trinidad
Organic Practitioners) Multi-Purpose Cooperative is
at the forefront in the marketing of organic products

98 | Cabrea et al.
in the Region. In Regions III and IV-A, the channel is
simpler since it eliminates some players, thus, more
systematic and more efficient. This characterizes a
modern supply chain. Corporate-owned individual
farms market their own produce and enter into
contract arrangements with buyers.
Fig. 1. Market Channel of Organic Temperate
Vegetables In the CAR.
Fig. 2. Market Channel of Organic Temperate
Vegetables Outside of the CAR.
Five (5) types of intermediaries exist in the CAR,
namely, cooperative, assembler-wholesaler-retailer,
assembler-wholesaler, assembler-retailer and retailer.
This resulted in a two to five-layer marketing channel
that produced six (6) supply chain cases. The greatest
portion of the farmers’ produce goes to the
cooperative (81.6%) and the remainder to a Baguio-
based retailer (10.9%), Manila-based assembler-
wholesaler (2.3%), Baguio-based assembler-retailer
(1.4%), Baguio-based assembler-wholesaler-retailer
(1.6%), Manila-based retailer (0.4%) or directly to the
consumer (1.8%). Outside the CAR, consolidator-
retailers, institutional buyers and retailers make up
the marketing channel producing three (3) supply
chain cases. Majority of the organic production goes
to Manila-based assembler-retailers (65%) and the
rest to institutional buyers (30%) and retailers (5%).
The La Top Multi-Purpose Cooperative in Benguet
Fig. prominently in the marketing of organic products
in the Cordilleras. Prices of organic products in the
Cordilleras are indexed on La Top prices. La Top is
the only third-party certified organic producer in the
Region. It maintains four (4) retail stores and rents
stalls inside supermarkets and department stores. It
regularly supplies buyers in Manila and imposes a 30
percent marketing margin for this transaction.
Assembler-wholesaler-retailers are farmers
themselves who have established marketing
connections and developed marketing skills. In
addition to their own produce, they obtain products
from fellow farmers, La Top or non-La Top members
alike, and sell them on wholesale or retail bases in
Manila. They retail in regular weekend organic
markets by renting spaces or stalls. This type of
intermediary sells both certified organic and non-
certified organic or natural products.
Assembler-wholesalers are powerful forces engaged
in the trade of organic products for the purpose of
gaining profit and as an advocacy for the promotion
of health and wellness. They obtain products from
different points in the country, not necessarily
certified as long as organic and natural. They sell
them to regular patrons like retailer.
Assembler-retailers may either be farmers or
businessmen who get vegetables from other farmers
and retail the same in supermarkets or grocery stores
located in high-end malls and department stores in
Manila, bearing their own label or brand name.
Manila-based assembler-retailers source their
commodities from regular suppliers in Benguet or
other provinces outside the CAR. Others enter into
contract growing arrangements with farms which are
capable of providing the volume required. They earn
the highest net profit but also incur the highest unit
cost in the trade of organic vegetables.

99 | Cabrea et al.
Retailers are businessmen who rent spaces in
buildings or commercial areas where regular buyers
go. They sell both certified and non-certified natural
or organic products, in fresh or processed form.
Baguio-based retailers incur the lowest unit cost for
products sold while gaining maximum profit. It is the
most efficient channel in the trade of organic
vegetables in the CAR. Manila-based retailers are
one-stop shops for organic and natural products, both
local and imported, in fresh and processed forms.
They also function as health and wellness stores or
cafes offering only organic food in their menus.
Institutional buyers are composed of hotels,
restaurants and cancer clinics. Restaurants have
entrees in their menu using only purely organic
products as ingredients. Clinics, which cater to cancer
patients or offer alternative medicine, order from
suppliers in their behalf in specified kilogram packs
mostly of herbs and vegetables which are known to
have anti-oxidant properties. In the absence of cold
chain facilities for the marketing of organic vegetables
in the CAR, traders make use of cargo buses to
transport their goods. This practice proved to be
unfavourable and inefficient since it resulted to
damages on the commodities.
Profitability and Efficiency
Based on Table 3, among the intermediaries selling
organic temperate vegetables in the CAR, the
cooperative has the lowest net profit per kilogram in
the retail sale of vegetables (1.60 pesos) while the
Baguio-based assembler retailer has the highest net
profit (133.40 pesos) and also the highest unit cost
(160.10 pesos). The retail store based in Baguio, on
the other hand, incurs the lowest cost (1.50 pesos) in
the trade of organic vegetables.
Table 3. Profitability of organic temperate vegetable marketing in the CAR, by intermediary, per kilogram, 2012.
Commodity
Type of Intermediary
Ave.
Net
Profit
perkg.
Ave.
Unit
Cost
perkg.
Net
Profit-
Cost
Ratio
Cooperative
Baguio-based
Retailer
Baguio-based Assembler –
wholesaler – Retailer
Baguio-based
Assembler –
Retailer
Manila-based
Assembler-
Wholesaler
Manila-based
Retailer
Net Profit Unit Cost Net
Profit
Unit
Cost
Net Profit Unit Cost Net
Profit
Unit
Cost
Net
Profit
Unit
Cost
Net
Profit
Unit
Cost
W R W R W R W R
Beans
(Baguio/snap)
19.80 1.80 7.30 7.20 8.20 0.80 86.40 103.60 10.00 8.00 21.30 23.90 .89
Beans (French) 45.00 0.03 22.50 22.50 20.40 2.10 44.40 69.90 15.60 28.10 102.30 122.70 10.20 7.80 29.00 26.20 1.11
Broccoli 38.00 2.00 16.00 16.00 16.30 1.70 35.40 55.50 12.60 22.50 81.80 98.20 1.90 15.10 35.20 27.80 24.10 22.70 1.06
Cabbage 25.20 1.20 10.80 10.80 10.90 1.10 23.80 37.00 8.20 15.00 182.70 219.30 .30 2.70 3.30 2.70 29.40 31.50 0.94
Carrots 37.30 1.10 16.70 16.90 16.30 1.70 35.60 55.50 12.40 22.50 164.60 197.40 1.10 8.90 8.90 7.10 30.90 31.80 0.97
Cauliflower 39.80 3.80 14.20 14.20 16.30 1.70 35.50 55.50 12.50 22.50 164.60 197.40 6.30 50.70 35.20 27.80 35.20 39.30 0.90
Cucumber
(Japanese)
164.60 197.40 164.70 197.40 0.83
Cucumber
(other varieties)
37.10 1.10 16.90 16.90 16.30 1.70 35.50 55.50 12.50 22.50 11.10 8.90 14.00 8.30 1.68
Lettuce 31.30 1.30 13.70 13.70 13.60 1.40 29.40 46.30 10.60 18.70 173.70 208.40 5.20 3.80 34.30 35.10 0.98
Pechay
(flowering)
24.70 0.70 11.30 11.30 13.60 1.40 68.20 81.80 3.60 2.40 17.20 19.40 0.89
Pechay (other
varieties)
19.50 1.50 7.50 7.50 13.60 1.40 17.80 27.80 6.20 11.20 68.20 81.80 8.60 6.40 17.10 15.50 1.11
Potato 24.20 0.20 11.80 11.80 10.90 1.10 23.70 37.00 8.30 15.00 182.70 219.30 3.60 2.40 33.50 37.50 0.94
Spinach
(Japanese)
31.00 1.00 14.00 14.00 13.60 1.40 173.70 208.40 4.80 38.20 29.10 22.90 37.00 45.70 0.78
Spinach (New
Zealand)
32.50 2.50 12.50 12.50 13.60 1.40 20.60 46.30 10.40 18.70 173.70 208.40 4.80 38.20 19.50 15.50 32.50 36.80 0.88
Tomato (small
/cherry)
37.90 1.90 16.10 16.10 16.30 1.70 35.50 55.50 12.50 22.50 50.00 60.00 26.90 21.00 21.50 17.30 1.24
Tomato (large) 34.30 4.30 10.70 10.70 164.60 197.40 31.90 25.10 50.20 58.30 0.86
Average 31.80 1.60 13.50 13.50 14.30 1.50 30.70 49.30 11.10 19.90- 133.40 160.10 3.20 25.60 16.20 12.60 37.00 40.40
Net Profit-Cost
Ratio
2.36 0.12 9.53 2.77 2.48 0.83 0.125 1.29
The highest net profit (164.70 pesos) and highest unit
cost (197.40 pesos) are computed for Japanese
cucumber, across all intermediaries. The lowest net
profit (14.00 pesos) and unit cost (8.30 pesos) per
kilogram are obtained for the sale of native cucumber
variety. Next to Japanese cucumber, large tomato
(50.20 pesos), Japanese spinach (37.00 pesos),
cauliflower (35.20 pesos) and lettuce (34.30 pesos)
have high net profits. Large tomato (58.30 pesos),
Japanese spinach (45.70 pesos), cauliflower (39.30
pesos, and New Zealand spinach (36.80 pesos), next
to Japanese cucumber, entail high unit costs.
As to efficiency, among the intermediaries, the retailer
(9.53%) based in Baguio is the most efficient while the
cooperative, as retailer (0.12%), and the Manila-based
assembler-wholesaler (0.125%) are the least efficient
based on low profit-cost ratios obtained.
By commodity, the five (5) which have the highest profit-

100 | Cabrea et al.
cost ratios are native cucumber (1.68%), cherry/small
tomato (1.24%), French beans (1.11%), chingkang/
pakchoi pechay (1.11%) and broccoli (1.06%).
Value chain and marketing margins
Three marketing channels were analysed for value
chain and marketing margins (Table 4a, 4b & 4c). The
first channel is through the cooperative selling
through its retail stores and to Manila-based
institutional buyers. The cooperative earns higher
from the latter realizing an average net profit of 56%
of its margins. Highest margins are obtained for
cauliflower (25.60 pesos) and lowest for
chingkang/pakchoi pechay (12.00 pesos). The second
channel involves the sale to Manila-based retailers
where the cooperative realizes an average net margin
of 66% slightly higher than what the retailer earns
which averages 57%. Based on cost-margin ratios, the
cooperative earns highest for large tomato and lowest
for Baguio beans. The retailer earns more or less the
same for all the vegetables under study. Highest
margins are also obtained for cauliflower (75.00
pesos) and lowest for potato (27.80).
The last channel involves the direct trade of
vegetables by the farmer to Baguio-based assembler-
wholesaler-retailer where the farmer gets 100 percent
of the selling price. The trader earns more for
wholesale than for retail since he incurs higher cost
for the latter having to pay stall rental, licenses,
permits and other marketing cost. Highest margins
are obtained for French beans (54.30 pesos) and
lowest for chingkang/pakchoi pechay (21.60 pesos).
Table 4a. Selling price, costs andmarketing margins of organictemperatevegetablesintheCAR, 2012,Php/kg(Channel1*).
Commodity Actors
Farmer Cooperative (Retail) Cooperative (Wholesale)
Selling
Price
Margins Cost Net
Margins
Selling
Price
Margins Cost Net
Margins
Total
Net
Margins
Baguio beans
Amount 51.00 60.00 9.00 7.20 1.80 78.00 18.00 7.30 10.70 12.50
Cost/Margin (%) 80.00 40.56
French beans
Amount 127.50 150.00 22.50 22.50 0.00 195.00 45.00 22.50 22.50 22.50
Cost/Margin (%) 100.00 50.00
Broccoli
Amount 102.00 120.00 18.00 16.00 2.00 156.00 36.00 16.00 20.00 22.00
Cost/Margin (%) 88.89 44.44
Cabbage
Amount 68.00 80.00 12.00 10.80 1.20 104.00 24.00 10.80 13.20 14.40
Cost/Margin (%) 90.00 45.00
Carrots
Amount 102.00 120.00 18.00 16.90 1.10 156.00 36.00 16.70 19.30 20.40
Cost/Margin (%) 93.89 46.39
Cauliflower
Amount 102.00 120.00 18.00 14.20 3.80 156.00 36.00 14.20 21.80 25.60
Cost/Margin (%) 78.89 39.44
Cucumber-native
Amount 102.00 120.00 18.00 16.90 1.10 156.00 36.00 16.90 19.10 20.20
Cost/Margin (%) 93.89 46.94
Lettuce
Amount 85.00 100.00 15.00 13.70 1.30 130.00 30.00 13.70 16.30 17.60
Cost/Margin (%) 91.33 45.67
Flowering pechay
Amount 68.00 80.00 12.00 11.30 0.70 104.00 24.00 11.30 12.70 13.40
Cost/Margin (%) 94.17 47.08
Chingkang/ Pakchoi Pechay
Amount 51.00 60.00 9.00 7.50 1.50 78.00 18.00 7.50 10.50 12.00
Cost/Margin (%) 83.33 41.67
Potato
Amount 68.00 80.00 12.00 11.80 0.20 104.00 24.00 11.80 12.20 12.40
Cost/Margin (%) 98.33 49.17
Japanese Spinach
Amount 85.00 100.00 15.00 14.00 1.00 130.00 30.00 14.00 16.00 17.00
Cost/Margin (%) 93.33 46.67
New Zealand Spinach
Amount 85.00 100.00 15.00 12.50 2.50 130.00 30.00 12.50 17.50 20.00
Cost/Margin (%) 83.33 41.67
Cherry Tomato
Amount 102.00 120.00 18.00 16.10 1.90 156.00 36.00 16.10 19.90 21.80
Cost/Margin (%) 89.44 44.72
Large Tomato
Amount 85.00 100.00 15.00 10.70 4.30 130.00 30.00 10.70 19.30 23.60
Cost/Margin (%) 71.33 35.67
*Traded by the Cooperative through its retail stores and to Manila-based institutional buyers
Table4b.Sellingprice,costsandmarketingmarginsoforganictemperatevegetablesintheCAR,2012,Php/kg(Channel2*).
Commodity Actors
Farmer Cooperative (wholesale) Manila-based Retailer
Selling
Price
Margins Cost Net
Margins
Selling
Price
Margins Cost Net
Margins
Total Net
Margins
Baguio beans
Amount 51.00 78.00 27.00 7.30 19.70 96.00 18.00 8.00 10.00 29.70
Cost/Margin (%) 66.44 44.44
French beans
Amount 127.50 195.00 67.50 22.50 45.00 213.00 18.00 7.80 10.20 55.20
Cost/Margin (%) 33.33 43.33
Broccoli
Amount 102.00 156.00 54.00 16.00 38.00 219.00 63.00 27.80 35.20 73.20
Cost/Margin (%) 51.91 44.13
Cabbage
Amount 68.00 104.00 36.00 10.80 25.20 110.00 6.00 2.70 3.30 28.50
Cost/Margin (%) 30.00 45.00
Carrots Amount 102.00 156.00 54.00 16.70 37.30 172.00 16.00 7.10 8.90 46.20

101 | Cabrea et al.
Commodity Actors
Farmer Cooperative (wholesale) Manila-based Retailer
Selling
Price
Margins Cost Net
Margins
Selling
Price
Margins Cost Net
Margins
Total Net
Margins
Cost/Margin (%) 30.92 44.38
Cauliflower
Amount 102.00 156.00 54.00 14.20 39.80 219.00 63.00 27.80 35.20 75.00
Cost/Margin (%) 26.30 44.13
Cucumber-
native
Amount 102.00 156.00 54.00 16.90 37.10 176.00 20.00 8.90 11.10 48.20
Cost/Margin (%) 31.30 44.50
Lettuce
Amount 85.00 130.00 45.00 13.70 31.30 139.00 9.00 3.80 5.20 36.50
Cost/Margin (%) 30.44 42.00
Flowering
pechay
Amount 68.00 104.00 36.00 11.30 24.70 110.00 6.00 2.40 3.60 28.30
Cost/Margin (%) 31.39 40.00
Chingkang/
Pakchoi Pechay
Amount 51.00 78.00 27.00 7.50 19.50 93.00 15.00 6.40 8.60 28.10
Cost/Margin (%) 27.78 42.67
Potato
Amount 68.00 104.00 36.00 11.80 24.20 110.00 6.00 2.40 3.60 27.80
Cost/Margin (%) 32.78 40.00
Japanese
Spinach
Amount 85.00 130.00 45.00 14.00 31.00 182.00 52.00 22.90 29.10 60.10
Cost/Margin (%) 31.11 44.04
New Zealand
Spinach
Amount 85.00 130.00 45.00 12.50 32.50 165.00 35.00 15.50 19.50 52.00
Cost/Margin (%) 27.78 44.29
Cherry Tomato
Amount 102.00 156.00 54.00 16.10 37.90 204.00 48.00 21.10 26.90 64.80
Cost/Margin (%) 29.81 43.96
Large Tomato
Amount 85.00 130.00 45.00 10.70 34.30 187.00 57.00 25.10 31.90 66.20
Cost/Margin (%) 23.78 44.04
*Traded by the Cooperative to Manila-based retailers
Table 4c. Sellingprice, costsandmarketing margins of organic temperatevegetablesin the CAR,2012, Php/kg (Channel 3*).
Commodity Actors
Farmer Baguio-based wholesaler Baguio-based retailer
Selling
Price
Margin
s
Cost Net
Margins
Selling
Price
Margins Cost Net
Margins
Total Net
Margins
French beans
Amount 150.00 210.00 60.00 15.60 44.40 248.00 38.00 28.10 9.90 54.30
Cost/Margin (%) 26.00 73.95
Broccoli
Amount 120.00 168.00 48.00 12.60 35.40 198.00 30.00 22.50 7.50 42.90
Cost/Margin (%) 26.25 75.00
Cabbage
Amount 80.00 112.00 32.00 8.20 23.80 132.00 20.00 15.00 5.00 28.80
Cost/Margin (%) 25.62 75.00
Carrots
Amount 120.00 168.00 48.00 12.40 35.60 198.00 30.00 22.50 7.50 43.10
Cost/Margin (%) 25.83 75.00
Cauliflower
Amount 120.00 168.00 48.00 12.50 35.50 198.00 30.00 22.50 7.50 43.00
Cost/Margin (%) 26.04 75.00
Cucumber-native
Amount 120.00 168.00 48.00 12.50 35.50 198.00 30.00 22.50 7.50 43.00
Cost/Margin (%) 26.04 75.00
Lettuce
Amount 100.00 140.00 40.00 10.60 29.40 165.00 25.00 18.70 6.30 35.70
Cost/Margin (%) 26.50 74.80
Chingkang/ Pakchoi
Pechay
Amount 60.00 84.00 24.00 6.20 17.80 99.00 15.00 11.20 3.80 21.60
Cost/Margin (%) 25.83 74.67
Potato
Amount 80.00 112.00 32.00 8.30 23.70 132.00 20.00 15.00 5.00 28.70
Cost/Margin (%) 25.94 75.00
New Zealand Spinach
Amount 100.00 140.00 40.00 10.40 29.60 165.00 25.00 18.70 6.30 35.90
Cost/Margin (%) 26.00 74.80
Cherry Tomato
Amount 120.00 168.00 48.00 12.50 35.50 198.00 30.00 22.50 7.50 43.00
Cost/Margin (%) 26.04 75.00
*Traded by Cooperative member-farmers to Baguio-based assembler-wholesaler-retailer.
Conclusion
The organic vegetable industry continues to register
positive growth in terms of production area and
number of practitioners as a result of the
implementation of the Organic Agriculture Act of
2010. Though marketing associations and
cooperatives continue to play a major role in the
industry, big corporations engaged in production and
marketing play a vital part in driving the chain.
Organic temperate vegetable production is profitable
and efficient. In the CAR, returns to total expenses
and net profits are high for native cucumber,
cauliflower, Japanese spinach, broccoli, French beans
and lettuce. Capital, labor and land utilization ratios
are low for the aforesaid vegetables in addition to
cabbage. In Regions III and IV-A, returns to total
expenses and net profits are high for cauliflower,
lettuce (romaine/xanadu and lollo rossa varieties),
broccoli, cabbage and French beans. Capitalization,
labor and land utilization are also low for these
vegetables indicating efficiency of production.
Because, organic temperate vegetable production is
profitable and efficient, more will be encouraged to go
into or expand organic production. This is feasible
given that production is yet to be optimized in terms
of production area and the available unutilized area.
The emergence of new breeds of players makes the
marketing channel of organic vegetables in the
Cordilleras complex compared with a simpler and

102 | Cabrea et al.
more modern and integrated chain in the Regions
outside of the CAR. In the CAR, Baguio-based
retailers are the most efficient channel because they
incur the least cost. While assembler-retailers who
obtain concessions in supermarkets inside malls and
department stores to sell their own brand of organic
products imposed the highest price and earned the
highest net profit, they also incur the highest cost.
Across intermediaries, Japanese cucumber, large
tomato, Japanese spinach, cauliflower and lettuce
have the highest net profits while those which have
highest net profit-cost ratios are native cucumber,
cherry/small tomato, French beans,chingkang/
pakchoi pechay and broccoli.
The three marketing channels considered for value
chain and marketing margin analyses show cost and
margin differentials across players and across locations
indicating variations in the distribution of benefits
among key actors. The cooperative has higher gross
and net margins for products sold to Manila buyers
than those retailed in Baguio while incurring the same
cost for both. Manila-based retailers have lower gross
margins compared to wholesalers in Baguio however;
costs are more less the same. Traders who perform
both wholesale and retail functions realize higher net
margins for retail although they incur higher costs and
impose higher margins.
Marketing efficiency, product quality and marketing
margins are compromised because of the absence of
favourable transport facilities. Cold chain facilities
need to be established. The production of organic
temperate vegetables in the Philippines has its
strengths and weaknesses (Appendix A). Though best
practices had been noted, there is a need to improve
the efficiency of some elements of production,
processing, handling, distribution and marketing to
make farmers’ income better and make the industry
competitive and sustainable.
Acknowledgement
The author wholeheartedly acknowledges the
financial support of the Department of Agriculture-
Bureau of Agricultural Research (DA-BAR) and the
much appreciated support of the Don Mariano
Marcos Memorial State University in the completion
of this research. Special acknowledgement and
recognition for the invaluable contribution of Dr.
Diego A. Waguey (+), co-author of this research.
Gratitude is also extended to all the respondents, key
informants and the many kind souls who provided
significant assistance in the conduct of this research.
References
Argan MT. 2008. The factors related to organic food
consumption and healthy lifestyles: A study of Turkish
consumers. SEER: Journal for Labour and Social Affairs
in Eastern Europe 10, 121-135. https://www.jstor.org/
stable/43293256 Retrieved 1 February 2014
Canono J. 2000. Philippine Organic Products:
Organics Market Brief. A Global Agriculture Information
Network Report No. RP 0015, USDA-FAS.
Clemente JM. 2011. Organic farming is the way to go,
says Aquino on food security. Inquirer Central Luzon.
Digal LN. 2004. The Case of the Philippines:
Regoverning Markets, Securing Small Producer
Participation in Restructured National and Regional
Agri-food Systems. http://www.regoverningmarkets
.org/en/resources/china/china_country_report_200
4/ Retrieved 24 June 2014
Fang-asanm L. 2008. Lettuce supply chains and
marketingmarginsinBenguet,Philippines.Banwa6,32-42.
IFOAM. 2014. Brief Overview of Organic Farming.
http://www.intracen.org/Organics/ Country-Profile-
Philippines.html
Johnson GI. 2008. The Vegetable Industry in
Tropical Asia: The Philippines, An Overview of
Production and Trade
http://www.avrdc.org. Retrieved 11 September 2012.
Macabasco DR. 2008. Agri-Food Trade Service:
The Philippine Vegetable Industry. http://www.
ats.agr.gc.ca/ase/4557-eng.htm. Retrieved 25
November 2014

103 | Cabrea et al.
Nemes N. 2009. Comparative Analysis of Organic
and Non-organic Farming Systems: A Critical
Assessment of Farm Profitability. Food and
Agriculture Organization of the United Nations.
Organization for Economic Cooperation and
Development. 2011. Greening Household
Behaviour: The Role of Public Policy https://www.
oecd.org/env/consumption-innovation/47234579.pdf
Retrieved 4 April 2014
Pearl. 2004. Global Market for Organic Products.
State of the Sector Report on Philippine Organic and
Natural Products.
Pearl. 2006. Global Market for Organic Products.
State of the Sector Report on Philippine Organic and
Natural Products.
Polomo JM. 2015. Japanese technology boosts organic
farming in Benguet. Rappler https://r3.rappler.com/
science-nature/environment-japanese-technology -
organic-farming-benguet. Retrieved 5 May 2015.
Porciuncula FL, Galang LM, Parayno RS. 2014.
Going organic: Understanding the organic vegetable
production environment in Central Luzon,
Philippines. International Journal of Scientific and
Technology Research 3, 81-91.
Salazar RC. 2014. Going organic in the Philippines.
social and institutional features. Agroecology and
Sustainable Food Systems 38, 199-229.
Salin V. 2000. Information technology and cattle-
beef supply chains. American Journal of Agricultural
Economics 82(5), 1105-1111.
Sarmiento GR. 2007. Organic Agriculture in the
Philippines, A Country Report. Regional Conference
on Organic Agriculture in Asia. Bangkok, Thailand.
Talaveramg. 2008. Understanding supply chain
management and its applicability in the Philippines.
Philippine Management Review 15.
Van Roekel JW, Willems S. Boselie DM. 2002.
Agri-supply Chain Management to Stimulate Cross
Border Trade in Developing Countries and Emerging
Economies. World Bank Paper Cross-Border Agri
Supply Chain Management. http://siteresources.
worldbank.org/INTARD/825826-1111044795683
/20424530/ Agri Supply Chain Mang_finalversion.pdf
Retrieved 4 April 2015
Appendix A. Practices and challenges of organic temperate vegetable production
Areas of concern Practices/Challenges
Input supply
Technologies for the production of sustainable, certified inputs still need to be developed, improved and
standardized and make farmer’s access to these technologies and resources greater. This is to reduce
cost, increase production and improve income.
Production
Improving crop resiliency and adoption of mitigation measures to address climate change which affects
production could be done through intensified and integrated capability building mechanisms for
organic farmers
The cooperative need to implement a planting calendar for its members to follow in order to address
high rate of spoilage and pull-out as a result of overproduction during particular months. There is an
imminent need for the Cooperative to go into value-adding activities like vegetable processing to
minimize the high rate of spoilage or pull-out during months when there is oversupply.
Marketing
Prices of organic products in the CAR are not affected by supply and demand forces as these are dictated by
the Cooperative which are stable for a period of one year. Outside of the CAR, the contract growing
arrangement between producers and traders make prices stable as long as the contract is in full force.
The practice of assemblers/ consolidator/integrators to obtain products from different sources results to
a co-mingling of certified and non-certified organic products in the market.
Retailers of organic products in Metro Manila have emerged into one-stop shops that sell all kinds and
forms of organic and natural products and double as cafes/restaurants serving healthy food items
The efficiency and profitability of the marketing function (retail) of the cooperative could be improved
by instituting value adding activities and by establishing a temperature control system in its retail stores
to extend shelf-life.

Profitability and efficiency analyses of organic temperate vegetable production in the Philippines

More Related Content

Profitability and efficiency analyses of organic temperate vegetable production in the Philippines