Pa lay business in the Philippines?
Can anyone explain the palay business in the Philippines. The way I understand it, the farmer grows the crop and sells it to someone else who stores the rice. The rice is later sold when the demand is higher. How much does the farmer sell to the trader for on average? How much does the trader sell the rice to the market for? I beleive there is a large mark up (70%)on the price from the farmer to the consumer in the market. Is this correct? I’m also wondering what is the proper way to store rice? ie in 50 kilo sacks in a warehouse or in large bins? Suggestions? Thanks for your answers.
Rice Farming is mostly done in the Northern part of the Philippines, from Bulacan to Nueva ecija. Other smaller landholdings have rice farming as well, but not in a scale found in the northern part of Luzon.
Depending on the FARM, the land is tilled by either the owner, or the owner’s Kasama or Tenant. Land Tenancy still exist in the Philippines and the Tenant is allowed to own 70% of the produce of the land returing 30% to the Land owner. If the land owner tills the land himself he can just pay the daily wage of the farmer, but no one really wants to be just paid the daily wage since rice farming is seasonal and it is sometimes only a two to three weeks work in the tilling and planting season and maybe two during harvesting and cleaning, which means LOW income for daily wage earners. So most folks would rather be tenants, which creates a cycle of landowner and tenancy.
In any case, once the tenant has 70% of the produce, he would keep what they need for the four month to fice month planting cycle and sell the rest of the produce. PALAY or the rice with shell needs to br dried, and most areas have no drying facility except using natural resources which is drying under the sun. This is sometimes a week’s chore depending on the sky’s condition, whether cloudy or sunny. If the PALAY is not dried properly, then the seed can still germinate and this causes spoiling. If the drying process is hurried too much, the grains break and becomes fine which is not a good quality grain since most buyers want the garins to be full.
The rice is stored in JUTE SACKS which allows the PALAY to breathe as air can pass in and out of the JUTE SACKS. The sacks can be 50kg to 100kg in size. Some storage houses uses BINS made from natural fibers as well. If the storage facility has a kiln drier, they can store the PALAY in airtight container, but again very few has this type of facility as it requires capital, and rice is fast moving, not really a long term storage crop like corn.
When you say the middle men has a high mark up, this is not really true, once you buy the PALAY from the Farmer, you have to dry it, then you have to thresh it or remove the HUSK which leaves you around 15% to 20% less bulk depending on the rice type you use. The husk is used for animal feed though, but the price is not as good as well. You have to protect rice from the weather, you cannot get it wet as it would spoil. So tyou storage facility needs to be good and it needs to be rodent free. Once you have husked the Palay you can now fill up smaller sacks of 50kgs and resell this at a higher price. But the average price is around Php 30 to 32.
Rice is regulated by the NFA or National Food Authority, which buys the RICE and is allowed to give license to rice dealers and graineries that would be for commercial use. The NFA together with DA works on rice importation, as this is cheaper since Thailand and China have larger land area for rice production compared with the Philippines.
If you own the land, with 7 hectares or more, then you proabably have a good chance of getting good profit. But if you would just be a middle man, and invest capital for the threshing, husking, drying and storing, then like any business you may want to look at the long term view as it would be years before an ROI is seen from this venture.
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