In-the-News

The paddy separator and husker at the Chen Yi Agventures facility.

FROM DISASTER TO INNOVATION

October 10, 2019

THE husband-and-wife tandem behind Chen Yi Agventures just wanted to help the victims of Supertyphoon Yolanda (international code name Haiyan), which struck the province of Leyte in November 2013.

French-Italian Patrick Renucci and his Filipino-Chinese wife Rachel Renucci-Tan were in France when they thought of coming to the Philippines to assist Yolanda’s victims, who were mostly farmers, in 2015. Before their visit, the couple lived the life in Paris, sipping champagne and white wine from Burgundy with a view of the Eiffel Tower from their home.

Patrick used to own and operate one of the largest printing companies in France. Rachel founded a real-estate investment fund management company based in Hong Kong, Shanghai and London, advising, restructuring and managing assets of over a billion dollars. After visiting Alangalang, Leyte, and seeing how impoverished the farmers were, the couple realized that the people in the municipality needed more than temporary aid. Despite the fact that Leyte, has large tracts of fertile farmlands, making it the fifth-largest rice-producing area in the Philippines, farmers in Alangalang were debt-ridden and poor.

What was initially a plan to help rebuild Leyte following the onslaught of Yolanda turned into a “Rice Revolution,” one that sought to transform rice cultivation into a profitable venture. This campaign culminated in the construction of a P1.7-billion rice processing plant in Alangalang, Leyte, which was inaugurated by no less than President Duterte last July.

After an extensive study of the farmers’ situation in Alangalang, the couple found that the plight of the locals was due to two things: debt and low yield. Rachel said farmers usually borrow between P41,650 and P50,000 to plant per cropping season, from loan sharks at an interest of 20 percent or more. Due to outdated and inefficient farming practices, she said farmers usually produce only 2.5 metric tons (MT) or about 50 to 60 sacks of unhusked rice or palay per hectare.

Rachel told the BusinessMirror in an interview that farmers earn a measly P2,100 from selling their crop, based on an average farm-gate price of P17.50 per kilogram. “Since there are two harvest seasons in a year, they would only earn P4,200 annually [per hectare].”

The couple said the low income is the primary reason for the farmers’ view that rice planting is just a source of additional income and not their main source of livelihood. Patrick said the plight of farmers could get worse as imports start to flood the market following the effectivity of the rice trade liberalization law in March.

The latest data from the Philippine Statistics Authority (PSA) indicated that the farm-gate price of dry palay in the first week of September sank to P16.28 per kilogram, the lowest since the first week of April 2013. The figure is nearly 30 percent lower than the P23.10 per kg recorded last year.

Partnership

The couple decided to launch the “Renucci Partnership Program,” which allows farmer-beneficiaries to have access to low-interest loans in kind: fertilizers, pesticides and one kind of high-yielding seed. Through its contract farming scheme, Chen Yi also extends high-tech planting and harvesting equipment to all farmer-members of the program.

Under the program, farmers will borrow P51,500, which carries an interest of 2 percent from Chen Yi Agventures. The money will finance the extension services and inputs that they will procure from the company to boost their yield. Farmers may use combined harvesters, tractors and automatic transplanters.

Planters will also have access to local inbred seed varieties provided by the Philippine Rice Research Institute, organic pest control, and new techniques, such as leveling their field for water management purposes. A field technician from Chen Yi Agventures will assist the beneficiaries in the implementation of the planting protocol.

Through the program, Patrick said the company is able to control the quality of the palay that it buys from farmers.

Uphill on trust

Good intentions, however, are not enough as the couple would find out the hard way. It took a considerable effort to persuade farmers to join their program as they were met with indifference and even suspicion by the locals.

“When we arrived [in Leyte] to launch this program, we thought everybody will try to join it, but this did not immediately happen,” said Patrick.

Further complicating matters, he said, was the fact that most of the farmers were merely caretakers and did not own the land. As caretakers, they did not have the incentive to improve their farming operations.

“The caretaker doesn’t want to make any improvement on the farm because he doesn’t have security on the job,” said Patrick. Earning the farmers’ trust was a painstaking process for the couple. Patrick recounted that he would spend long hours on the field training farmers to use Chen Yi Agventures’s machines.

“That is how we earned the trust of the people. They saw the white guy going in the field driving the tractor trying to teach the people,” he said.

Patrick said they got to convince some farmers to join their program after he suffered from schistosomiasis thrice. The disease was caused by parasitic flatworms found in rice paddies. “Now, we have at least 500 farmers in the program covering 750 hectares,” he said.

The automated rice processing plant, Rachel said, increased farmers’ confidence in the company and in the program. “We built the most technologically advanced processing complex in Southeast Asia in Alangalang. That would command some respect.”

Higher yield

The couple said their farming program was a success as it enabled farmers to triple their yield. From 2.5 MT per hectare, Patrick said their partners were able to raise their output to an average of 7 MT per hectare, which is equivalent to 200 sacks. Sometimes, he said, farmers can produce 10 MT.
Patrick said the increase in yield had increased farmers’ profit exponentially, regardless of the prevailing farm-gate price. At a farm-gate price of P17.50 per kg, the couple estimated that farmers could still earn P141,960 per hectare in a single year.

“When they joined our program, maybe sometimes they earned P20,000 per cropping, or P40,000 a year. Some farmers already earned more than P150,000 per cropping. And there are two croppings [each year],” he said.

Since the program calls for the extensive use of farm machines, Rachel said the production cost incurred by their partner-farmers is relatively low. “With higher yield, the cost of producing a kilo of rice is P7, which is competitive with that of Vietnam and Thailand.”

The improvement in the purchasing power of farmers in Alangalang is evident in the rise of new establishments, such as fast-food chains and a mall, in the municipality.

“Today, the landscape of Alangalang has changed. Now, there is a Jollibee and an Andok’s [roasted chicken],” noted Patrick.

Dalisay-Renucci rice

Patrick said the company’s fully automated processing plant allows the company to mill 50,000 MT of unhusked rice and process 25,000 MT to 30,000 MT of rice. He said the company uses mechanical driers to ensure that their rice will have no pests. Rice is kept in temperature-controlled silos to keep it fresh. Since the entire process is automated, the company can easily maintain the fresh quality of the rice.

“We mill on demand. So if we have an order from the supermarket that is the only time that we mill palay,” said Patrick. The result of this meticulous attention to ensuring the freshness of rice is the Dalisay variety.

“We want [the name of the product] to be very Filipino and dalisay is an old word. It means freshness or purity. So that is what we want to be associated with our rice because we are sure our rice is pure and came from Filipino farms,” said Patrick.

The company officially launched last month its Dalisay rice variety, which is now available in major supermarkets after its soft launch in Forbes Park in Makati City, where it got good reviews. Rachel attributed this to the freshness and quality of their product. The company’s rice, she said, is very much unlike the imports which tend to be sprayed with chemical multiple times to keep pests away.
“Ours is freshly harvested, freshly milled and most important, we do not use any chemical on the rice,” said Rachel. “The processing method in our plant ensures that nutrients and fiber in our rice are retained so it is healthier.”

Model venture

The price of Dalisay rice is competitive even if it is being marketed as premium rice. Depending on volume, consumers can buy the Renucci rice variety at P74 to P85 per kg. Other comparable rice varieties are sold at P62.50 per kg to as high as P106.75 per kg.

At this point, the couple said it is too early to say whether they will make money from Dalisay rice. They noted, however, that initial market response to it was “fairly good.”

Rachel said she is “eagerly” awaiting the numbers to come in since these figures will determine the sustainability of Chen Yi Agventures’s business model, which could be replicated by the government and other interested parties in other parts of the country.

“We are a private enterprise; we plan to be highly profitable. We are not here as a charity. This is not a foundation for tax purposes,” said Rachel. “We plan to be one of the major players in the rice. To produce quality rice for domestic consumption for now, and maybe export later.” Patrick said they are “willing to share all we learned, what we are doing to make farming sustainable and help planters.”

He stressed the importance of consolidating farms so that planters can achieve economies of scale.
“One hectare is too small for mechanization. You know the average farm in the United States. It is 2,000 hectares,” said Patrick.

“Let us start by encouraging the farmers and bring back young people in [consolidated] farms of 10 hectares and we are sure that they can make money,” he added.

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