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MARKETING COSTS STRUCTUREFOR CORN
Marketing Costs Structure for Corn iii
FOREWORD
Domestic production of agricultural commodities finds its way in the market. Inthe course of trading, the product passes through various marketing channels. Themarket flow varies from a very simple one to a more complex set-up depending on thenature and usage of the commodity. There are basic factors that influenced the level andstructure of the costs involved in the movement of the product. It is therefore importantto better understand the interplay between and among the market players and where theyare based as major considerations in the formulation of the types of interventions toimprove efficiency.
To address this concern, the Bureau of Agricultural Statistics (BAS) through itsAgricultural Marketing Statistics Analysis Division (AMSAD) conducts studies onmarketing costs structure for selected high value commercial crops in specific supply andtrading areas. This undertaking aims to provide information on the charges that eachparticipant in the marketing chain incurs in carrying out the marketing process. Theresults of these studies will be presented in a serialized report featuring one commodity ineach series.
FOREWORD ………………………………………………………………………………………iii
I. Introduction………………………………………………………………………………… 1
II. Objectives…………………………………………………………………………………… 2
III. Methodology……………………………………………………………….…………………2
IV. Study Procedures…………………………………………………………………………… 3
V. Study Limitations…………………………………………………………………………… 5
VI. Discussion of Results…………………………………………………………………………6
Geographic Coverage………………………………………………………………………6Distribution of Respondents……………………………………………………………… 6Profile of Respondents…………………………………………………….……………… 7Marketing Practices and Functions……………………………………….……………… 12
Procurement …………………………………………………………………………… 12Distribution ………………………………………………………………………………13
Geographic Flow………………………………………………………..…………………15Marketing Channels……………………………………………………..…………………17Marketing Costs……………………………………………………………………………21
Labor ………………………………………………………………….…………………21Transportation ………………………………………………………………………… 23Material Inputs …………………………………………………………………………26Miscellaneous and Other Operating Costs ………………………………………………25Depreciation ……………………………………………………………………………27Aggregated Marketing Costs …………………………………………….………………28Total Marketing Costs …………………………………………………..………………28
VII. Problems/Constraints Encountered………………………………………………………… 29
VIII. Monitoring of Marketing Costs Data by the National Food Authority………………………30
IX. Conclusions and Recommendation………………………………………………………… 31
TABLE OF CONTENTS
Marketing Costs Structure for Corn iv
1 CORN: Distribution of respondents, by type, byprovince/municipality, 2000 7
2 CORN: Distribution of respondents, by type ofmarketing participants, by province, 2000 8
3 CORN: Number and percentage distribution ofrespondents by farm size, Isabela, 2000 9
4 CORN: Number and percentage distribution offarmer-respondents, by type of landownership, Isabela, 2000 9
5 CORN: Distribution of trader-respondents by typeof business ownership, by province, 2000 10
6 CORN: Distribution of trader-respondents, by length of experience, by province, 2000 11
7 CORN: Distribution of trader-respondents, by typeof marketing participant, by nature ofcapitalization, 2000 11
8 CORN: Distribution of respondents by mode ofdelivery for procurement, 2000 12
9 CORN: Distribution of respondents by mode ofpayment for procurement, 2000 13
10 CORN: Distribution of respondents by mode ofdelivery for distribution, 2000 14
11 CORN: Distribution of trader-respondents by modeof payment for distribution, 2000 15
12 CORN: Sources and destinations by area, byprovince, 2000 17
STATISTICAL TABLES
Marketing Costs Structure for Corn v
13 CORN: Labor costs incurred by marketingparticipants, by province, 2000 22
14 CORN: Transportation costs, by practice/activity, byprovince, 2000 24
15 CORN: Cost of material inputs incurred, bymarketing participants, bypractice/activity/cost item, by province,2000 25
16 CORN: Miscellaneous and other operatingexpenses, by province, 2000 26
17 CORN: Imputed costs of depreciation, by province,2000 28
18 CORN: Total marketing costs, by province, 2000 29
19 CORN: marketing participants in Isabela andCagayan, 2000 30
20 CORN: Marketing costs structure (cash cost andimputed cost), by province, 2000 40
Marketing Costs Structure for Corn vi
13a CORN: Labor costs incurred by marketingparticipants, by activity/practice, Isabela, 34
13b CORN: Labor costs incurred by marketingparticipants, by activity/practice, Cagayan,2000 35
14a CORN: Transportation costs incurred by marketingparticipants, by activity/ practice, Isabela,2000 35
14b CORN: Transportation costs incurred by marketingparticipants, by activity/ practice, Cagayan,2000 36
15a CORN: Cost of material inputs, by marketingparticipants, Isabela, 2000 36
15b CORN: Cost of material inputs, by marketingparticipants, Cagayan, 2000 37
16a CORN: Miscellaneous and other operatingexpenses, by marketing participants, Isabela,2000 37
16b CORN: Miscellaneous and other operatingexpenses, by marketing participants,Cagayan, 2000 38
17a CORN: Imputed costs of depreciation, by marketingparticipants, Isabela, 2000 38
17b CORN: Imputed costs of depreciation, by marketingparticipants, Cagayan, 2000 39
ANNEX
Marketing Costs Structure for Corn vii
1 Tracing Approach……………………………………………………………………………… 2
2 Geographic Flow of Corn in Selected Provinces, 2000…………………………………………16
3 Marketing Channels for Corn, Isabela, 2000……………………………………………………18
4 Marketing Costs for Corn, by level of marketing participants, Isabela, 2000……………………19
5 Comparative Marketing Costs for Corn in Isabela (BAS & NFA)………………………………20
LIST OF FIGURES
Marketing Costs Structure for Corn viii
Marketing Costs Structure for Corn 1
MARKETING COSTS STRUCTURE FOR CORN
I. INTRODUCTION
Costs or expenditures are essential indicators of economic activities. Policy
makers use costs and returns on investment as bases in identifying and prioritizing the
types of assistance to be provided to producers in the agriculture and fishery sectors.
Information on production costs are very well captured at the farm level. The
costs incurred after production are determined following the flow of the commodities
from the supply (farm) level to the demand (consumers) level. The observed practices in
moving the products provide the reference for appropriate accounting of the costs of
services rendered at each level of market players along the commodity chain. For the
costs that the commodity assumes there is a corresponding margin that each market
participant takes.
Inadequate information on marketing costs encourages the Bureau of Agricultural
Statistics (BAS) to develop and establish a general approach in determining the
marketing costs structure that focused initially on crops specifically palay/rice. The
growing demand from data users for the same information on other crops, livestock and
fisheries has drawn support from various sectors. The BAS through its Agricultural
Marketing Statistics Analysis Division (AMSAD) started to undertake marketing costs
studies in year 2000 for selected high value commercial crops (HVCC) in selected supply
and demand provinces. The studies covered corn for cereals; cabbage and potato for
vegetables; calamansi, mango, and papaya for fruits; and orchids and rose for cutflowers.
The results of these studies have been viewed to be significant to the bureau’s clients,
which include farmers, policymakers, consumers, and other entities who use marketing
costs in the interpretation and assessment of market price behavior and ultimately in
making production and marketing decisions. This particular report will focus on the
marketing costs structure for corn.
Marketing Costs Structure for Corn 2
II. OBJECTIVES
The main objective of study is to determine the components and the corresponding
marketing costs incurred by marketing participants in major corn producing areas and
trading centers.
III. METHODOLOGY
The study employs the tracing approach starting from the supply level
(production) to the demand (consumption) level. The figure below illustrates the general
scheme used in the study.
Figure 1. Tracing Approach
SupplyArea 1
TradingCenter
SupplyArea 2
Demand Center/Processing Level
Marketing Costs Structure for Corn 3
IV. STUDY PROCEDURES
Corn is a major commodity produced in many provinces nationwide. From 1992
to 2001, it contributes about 6.25% to the national agriculture output. Although corn is
considered as a secondary crop in most palay producing provinces, its marketing system
calls for employing a differentiated tracing approach. The study team traced the flow of
corn from the supply level to the demand level.
Team Composition
The staff of the AMSAD and a representative from the Survey Operations
Coordinating Division (SOCD) conducted the study from December 3-16, 2000. Two
staff members of the Bureau’s Provincial Operations Center (POC) in each supply
province participated in identifying respondents, key informants and conduct of
interview.
Preparatory Activities
Survey instruments were prepared prior to the conduct of the study. The
instruments included guide questions for farmers and traders and a manual of instructions
in conducting the fieldwork. The survey instruments were pre-tested in the province of
Cagayan during the third quarter of 1999 to determine the applicability and
appropriateness of the set of questions. The survey instruments were revised and
reproduced.
Research Sites
The research concentrates in Luzon and chooses Isabela as starting point as it is
the second top producing province contributing about 14.5% to the national corn
production. Further, previous studies indicate that corn produced in Isabela is sold at
wholesale to adjacent provinces and to Luzon processors.
Marketing Costs Structure for Corn 4
The geographical domain of the research includes the municipalities of Echague,
Roxas, and Cauayan. Fieldwork started at the farm level. Two top producing barangays
on each municipality were selected using the compare and contrast method. One
barangay is more accessible from the highway and the other one is remote or interior.
From the farm level, the research team traced the traders identified by the farmer-
respondents as buyers of their produce. These traders were mostly located in Cauayan.
Based on the flow of corn from Cauayan, the team moved to Nueva Ecija where
identified feedmills are located.
Another province covered by the study was Cagayan in order to determine
whether corn produced in Isabela is sold to nearby provinces up north.
Selection of Sample Respondents
At each level of the marketing system, i.e. production and processing, the research
team interviewed key informants, farmers, and traders. The team interviewed sample
respondents and key informants using the structured questionnaires. Only farmers and
traders who actually engaged in producing/trading corn from January to December 2000
were selected and interviewed.
At the farm level, the barangay (village) chairman/other officers, members of
farmer associations and cooperatives served as key informants in locating farmer
respondents and gathering information on corn marketing practices. The number of
farmer respondents interviewed varied depending on the trends and trading patterns
observed/established in the process of building up information needed in the research.
Marketing Costs Structure for Corn 5
Data Processing
Prior to integration of the initial findings, on-field validation of data gathered at
the farm level against the information given by respondents at the trading center level
was conducted to avoid underestimation or overestimation of costs and to facilitate the
compilation of survey returns.
At the central office, the survey returns were compiled and tabulated manually.
Aggregated costs were again validated from the responses of the big industry players and
the results of special studies undertaken by the National Food Authority (NFA).
Report Preparation
The research team prepared the technical report that discussed the components of
the marketing costs structure of corn produced in Isabela. Also included in the report are
the marketing costs borne by traders who buy and sell corn to other provinces in Luzon
particularly Nueva Ecija.
V. STUDY LIMITATIONS
The study was conducted in December and used two croppings for year 2000 as
reference. In the design of the study, Cagayan was included as a demand area for corn
coming from Isabela. However, the study revealed that the province can be categorized
as a supply area that sells either to Isabela or outside the province.
Due to limited funds, the study covered Luzon provinces only. Although previous
studies conducted by BAS and other research and development projects indicated that
feedmills get corn from Southern Philippines, the study was not able to cover any area in
Visayas and Mindanao.
Marketing Costs Structure for Corn 6
VI. DISCUSSION OF RESULTS
The study focused primarily on the costs borne by marketing participants in
moving the commodity from the supply areas to the consumption centers. The discussion
of results is presented according to major cost components.
Geographic Coverage
The study covered three provinces namely, Isabela, Cagayan, and Nueva Ecija.
Isabela was the identified supply area where two major producing municipalities and
three trading centers (Cauayan, Santiago and Roxas) were covered.
Cagayan and Nueva Ecija were treated/classified as trading centers. However,
Cagayan was self sufficient on corn and did not procure from Isabela. The feedmills who
buy corn from Isabela were widely distributed in Luzon. In Nueva Ecija, the feedmills
were located in the municipalities of Munoz and San Leonardo and in Cabanatuan City.
Distribution of Respondents
The farmers and the traders were the two groups of respondents for the study. At
the barangay level, the farmers were chosen based on land area devoted to corn. The
study covered small to large-scale farmers. Table 1 shows the distribution of
respondents.
Marketing Costs Structure for Corn 7
Table 1. CORN: Distribution of respondents, by type,by province/municipality, 2000
Province/Municipality Farmer Trader Total
IsabelaIlaganEchagueCauayanSantiagoRoxas
Cagayan
Nueva EcijaMunozSan LeonardoCabanatuan
28
1612
17
63422
13
3
111
45
2215422
13
3
111
In Isabela, a total of 28 farmers, 16 in Ilagan and 12 in Echague were interviewed. At
the trading center level, 17 traders were interviewed.
Although Cagayan was covered as a trading center, the study found out that it was a
supply province that sells directly to other provinces. Thirteen trader-respondents were
interviewed. In Nueva Ecija, three feed mills distributed in the municipalities of Munoz
and San Leonardo and Cabanatuan City were covered.
Profile of Respondents
The study determined some basic characteristics of the respondents. The category
included size of farm and land ownership by farmers. On the other hand, traders were
grouped according to type of business ownership and length of experience.
Marketing Costs Structure for Corn 8
Type of marketing participants. The study had three major types of marketing
participants: farmers, traders and feedmillers. Trader-respondents were further classified
based on their sphere of influence in the conduct of their procurement and distribution
activities. Those who devoted resources to both functions were referred to as assembler-
distributors (A-Ds). Table 2 shows the type of marketing participants encountered in the
study.
Table 2. CORN: Distribution of respondents, by type of marketing participants,by province, 2000
PA-LD/PA-MD/Province Farmer RA-LDMA-LD
Retailer Feedmiller Total Percent
Isabela
Cagayan
Nueva Ecija
28
xxxxxxx
xxxxxxx
7
4
6
6
4
3
3
45
13
3
74
21
5
TOTAL 28 11 12 7 3 61 100
At the supply province of Isabela, 74% or a total of 45 respondents were covered
consisting of 28 farmers and 17 traders. Outside Isabela, 16 traders were interviewed, 13
in Cagayan and 3 in Nueva Ecija.
The four major groups of traders interviewed were as follows: 11 regional
assembler-large distributors (RA-LD), 12 combination of provincial assembler-large
distributor, provincial assembler-medium distributor and municipal assembler-large
distributor, 7 retailers and 3 feed millers.
Size of farm. The study identified farmers whose land areas ranged from small to
above average size of farm. Regardless of location, majority of the farmers (78%) owned
land of more than one hectare but not exceeding five hectares. Three farmers each owned
Marketing Costs Structure for Corn 9
land below one hectare and above five hectares. The distribution of farmer-respondents
by farm size is found in Table 3.
Table 3. CORN: Number and percentage distribution of respondentsby farm size, Isabela, 2000
Farm Size (In hectare) Number Reporting Percent
1 and below
1.01 – 5.00
Above 5 ha.
3
22
3
11
78
11
TOTAL 28 100
Land ownership. Most of the farmer-respondents (86%) owned the land they
operate while four or 14% were tenants. Table 4 presents the distribution of farmer-
respondents by land ownership.
Table 4. CORN: Number and percentage distribution of farmer-respondents by type of land ownership, Isabela, 2000
Land Ownership Number Reporting Percent
Owner-operator
Tenant
24
4
86
14
TOTAL 28 100
Marketing Costs Structure for Corn 10
Business ownership. In Isabela and Cagayan, majority or 28 trader-respondents
operated/ran their own business under single proprietorship category. Two of the
respondents were into a partnership and a corporation.
Of the three feed mills in Nueva Ecija, one operated on a partnership basis while
two were registered as corporation (Table 5).
Table 5. CORN: Distribution of trader-respondents by type of business ownership,by province, 2000
Type of Ownership Isabela Cagayan Nueva Ecija Total Percent
Singleproprietorship
Partnership
Corporation
15
1
1
13
1
2
28
2
3
85
6
9
TOTAL 17 13 3 33 100
Length of experience. The study considered length of experience as an important
gauge in the estimation of costs. It is hypothesized that longer experience enables traders
to estimate costs more precisely.
Most of the traders in Isabela revealed that they have been in corn trading from 1
to 15 years. Only one reported operational for more than 21 years. Trader-respondents
from Cagayan have between 6-10 years experience in corn trading. The feedmills in
Nueva Ecija were relatively new having been into corn trading for 1 to 5 years (Table 6).
Marketing Costs Structure for Corn 11
Table 6. CORN: Distribution of trader-respondents, by length of experience,by province, 2000
Years in Business Isabela Cagayan Nueva Ecija Total Percent
1 - 5
6 - 10
11 - 15
16 - 20
21 and above
4
6
6
1
1
8
1
2
1
3 8
14
7
2
2
24
43
21
6
6
TOTAL 17 13 3 33 100
Nature of capitalization. The amount and nature of the source of working capital
give the traders an allowance on the amount that he can pay for certain cost items. About
73% of the traders were self-financed while 27% were under financing (Table 7).
Table 7. CORN: Distribution of trader-respondents, by type of marketing participant,by nature of capitalization, 2000
PA-LD/PA-MD/Nature of Capitalization RA-LDMA-LD
Retailer Feedmill Total Percent
Self-Financed
Under Financing
9
2
8
4
7
3
24
9
73
27
TOTAL 11 12 7 3 33 100
Marketing Costs Structure for Corn 12
Marketing Practices and Functions
Farmers and traders perform marketing practices and functions that add value to
the product. Correspondingly, they incur certain amount of costs for value-adding,
transfer of ownership and for moving the products from one point to another. The major
practices and functions and the corresponding marketing costs are described in the
succeeding topics.
Procurement
Traders in Isabela procured corn grain from all possible producing barangays
within the province and from the adjacent province of Cagayan.
Manner of procurement. Assembler-distributors in Isabela and Cagayan either
picked-up or delivered corn. During periods when supply was low, traders picked up the
corn from the supply areas.
Luzon traders who supply corn to the feedmills in Nueva Ecija delivered the corn
straight to the warehouse. When local supply of corn is low, feedmills purchase corn
from Mindanao for pick-up from the seaport or pier. They also picked up imported corn
from the seaport (Table 8).
Table 8. CORN: Distribution of respondents by mode of deliveryfor procurement, 2000
PA-LD/PA-MD/Mode of Delivery RA-LDMA-LD
Retailer Feedmill Total Percent
Pick-Up
Delivered
Both
1
6
4
4
6
2
7
3
12
12
9
36
36
28
TOTAL 11 12 7 3 33 100
Marketing Costs Structure for Corn 13
Mode of payment. The two major types of payment were cash and delayed
payment of two days to a maximum of one week. Farmers received payment in cash.
However, there were instances when payment was done on the next procurement
schedule/day.
In Isabela and Cagayan, majority of the traders paid their suppliers in cash most
of the time. Feedmills paid in cash and deferred payment from 30 to 60 days. A fee of
10% was being retained for collection in the next delivery or upon completion of the
purchase order (Table 9).
Table 9. CORN: Distribution of respondents by mode of paymentfor procurement, 2000
PA-LD/PA-MD/Mode of Payment RA-LDMA-LD
Retailer Feedmill
Total Percent
Cash
Delayed Payment
Both
8
1
2
12 5
2 3
25
1
7
76
9
15
TOTAL 11 12 7 3 33 100
Distribution
Most of the time, traders from Isabela and Cagayan sold corn grain outside the
province. The mode of delivery and terms of payment depended on the agreement
between the buyer and the seller.
Mode of delivery. The mode of delivery for distribution or selling depended on
the type of buyer and the location. Traders in Isabela and Cagayan delivered truckloads
of corn to buyers. Consumers or buyers of retailers picked up corn grits from the stall.
Marketing Costs Structure for Corn 14
Buyers picked up the product purchased from the feedmills. Table 10 presents the
number and percentage distribution of traders by mode of delivery.
Table 10. CORN: Distribution of respondents by mode of deliveryfor distribution, 2000
PA-LD/PA-MD/Mode of Delivery RA-LDMA-LD
Retailer Feedmill Total Percent
Pick-Up
Delivered
Both
11
11
1
7
3
18
11
4
55
33
22
TOTAL 11 12 5 3 33 100
Mode of payment. The mode of payment for the commodity sold was different
from the mode of payment for supply procurement. Although traders would want cash
payment most of the time, the volume of delivery necessitates staggered payment
particularly if the buyers were feedmills.
In addition to cash payment, Isabela traders accepted delayed payment, of which
the length of time varies depending on the agreement between parties. Big traders
(assembler-distributors) could afford to accept delayed payment from 30 to 60 days. In
Cagayan, however, traders received payment in cash. Feedmills also received payment in
cash and delayed payment (Table 11).
Marketing Costs Structure for Corn 15
Table 11. CORN: Distribution of trader-respondents by mode of paymentfor distribution, 2000
PA-LD/PA-MD/Mode of Payment RA-LDMA-LD
Retailer Feedmill Total Percent
Cash
Delayed Payment
Both
7
1
3
4
4
4
3
4
3
14
9
10
42
27
31
TOTAL 11 12 7 3 33 100
Geographic Flow
Table 12 shows the tabular presentation of sources and destinations of corn in the
study areas. Figure 2 illustrates the flow of corn from Isabela. In Isabela, there are three
major trading centers – Cauayan, Roxas and Ilagan. The corn supply in these trading
centers can come from producing barangays and nearby municipalities. Cauayan, being
the center where big traders are located, got supply of corn from all producing
municipalities and outside the province, i.e. Pangasinan and Mindanao.
In Cagayan, Tuguegarao trading center sourced corn from its producing
barangays and nearby municipalities. Corn in Nueva Ecija came from all possible sources
in Luzon and from Mindanao provinces.
Figure 2. Geographic Flow of Corn, Selected Provinces, 2000.
Isabela
Nueva Ecija
BulacanPampanga
Metro Manila
Batangas
Pangasinan
La Union
Cagayan
Marketing Costs Structure for Corn 16
Marketing Costs Structure for Corn 17
Table 12. CORN: Sources and destinations by area, by province, 2000
Source DestinationProvince Within the province Outside the
ProvinceWithin theProvince
Outside theProvince
Isabela Ilagan
Roxas
Brgy. Salindigan,Sta. Victoria, SanAntonio, Gamu,Quirino, Cauayan
Barangay in Roxas
CauayanPampangaMetro ManilaBatangas
Echague
Cauayan
Cagayan Tuguegarao
Nueva Ecija Cabanatuan City
Barangay Pag-asa,Damang East,Joron, San Agustin,Santiago
Gordon, Santiago,Jones
Cagayan, Amulong,Solano, Bagas,Tuao, Pangkalan,Piat, Rizal
PangasinanMindanao
IsabelaCagayanBulacanMindanao
BulacanPampangaLa UnionPangasinanMetro Manila
BulacanPampanga
BulacanBatangasMetro Manila
Marketing Channels
The bulk of corn produced in Isabela was intended for selling as corn grain
outside the province. It is used as a main ingredient in the manufacture of feeds for
livestock and poultry.
Marketing Costs Structure for Corn 18
Figure 3 illustrates the flow of corn from the farmer to the processor’s (feed mill)
level. The farmer sold to the agent at the supply area or to the assembler-distributors in
the trading centers. These assembler-distributors in turn sold directly to the feed mill.
Those who were not able to get “purchase order” from the feedmills maintained an agent
who is responsible for finding a feed mill that offers competitive price.
Farmer
PA-LDPA-MDMA-LD
RA-LD
Feed Mill
Agent
Agent
Figure 3. Marketing Channels for Corn, Isabela, 2000
Prac
tice/
Act
ivity
/C
ost
Min
imum
Cos
t Ite
m(P
/kg)
Trad
erPr
ice
Mar
gin*
(P/k
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Tota
l2.
894
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8.00
0.24
0.02
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0.41
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andl
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ased
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r Cor
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Marketing Costs Structure for Corn 19
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Age
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Marketing Costs Structure for Corn 20
Marketing Costs Structure for Corn 21
Marketing Costs
Marketing corn from the farm level to the processing level (feed mill) entails a
number of costs items. The expenditure items include labor, transportation, material
inputs, other operating expenses and depreciation. The succeeding topics describe the
expenditure items and the corresponding costs as borne by the marketing participants in
the transfer of the commodity from the farmer to the processor (feed miller). The items
may be similar among certain level of marketing participants but the amount varies
depending on the extent of business operations.
As Cagayan is more of a supply area rather than a trading center for Isabela, some
expenditure in Cagayan are treated as costs before selling to assembler-distributors in
Isabela.
Labor
Labor costs are the expenses incurred or paid for the services rendered in
performing the activities undertaken from the farm to the processing level (feed mill).
From the farm up to the trading center level, the activities are shelling, drying,
warehousing, and handling. Table 13 presents the labor costs incurred by marketing
participants in Isabela and Cagayan. Tables 13a and 13b give the detailed costs by type
of marketing participants. Finding on labor costs also revealed the following:
Marketing Costs Structure for Corn 22
Table 13. CORN: Labor costs incurred by marketing participants,by province, 2000.
Practice/Activity/Cost Item Isabela Cagayan
peso per kilogram Shelling
Drying Solar Mechanical
Procurement Handling Piling Loading a/
Unloading b/
Corn classification
Selling Handling Loading Unloading Weighing c/
Salaries and Wages
0.25
0.410.220.19
0.31 0.30
0.100.100.10
0.01
0.141 0.14
0.100.04
0.001
0.04
0.060.06
0.23 0.21
0.070.07
0.07 0.02
0.04
TOTAL 1.151 0.33
a/ Loading of corn grains from the farm to the truck/vehicle.b/ Includes unloading and weighing.c/ Truckload is weighed using a truck scale.
! Shelling at the farm level is done at the farm level through the use of a gas-powered
mechanical sheller. It costs 25 centavos per kilogram.
! Solar and mechanical drying is done to obtain the ideal moisture content of 14%.
Drying costs 41 centavos in Isabela and 6 centavos in Cagayan.
! Traders hired laborers to perform handling activities for procurement and selling.
The costs incurred were loading from the pick-up point on to the truck/vehicle,
unloading at the trader’s point (usually at the warehouse) and piling or “kamada”
Marketing Costs Structure for Corn 23
inside the warehouse. For each move, handling cost an average of ten centavos per
kilogram or about P5.00 per bag of 50 kilograms in Isabela.
! When dry and ready for selling, loading on to the vehicle was charged another ten
centavos per kilogram.
! When corn was finally accepted at the feed mill, the whole truckload was weighed.
Weighing fee was 0.001 centavo per kilogram.
! Unloading at the destination point, usually at the feed mill cost lower (3 to 5
centavos or an average of 4 centavos per kilogram). There were laborers who
regularly stand-by around the mill to offer services for a fee.
! In addition, traders maintained regular employees paid on a monthly basis costing
the traders four centavos per kilogram.
Transportation
Transportation was a major consideration in moving the commodity from point to
point and from one participant to another. The cost was based on the distance, the
minimum of which was P5.00 per kilometer per bag. The transportation costs incurred by
marketing participants in Isabela and Cagayan are presented in Tables 14, 14a and 14b.
Findings on transportation costs revealed the following:
Marketing Costs Structure for Corn 24
Table 14. CORN: Transportation costs, by practice/activity,by province, 2000
Practice Isabela Cagayan
peso per kilogram Pre-marketing
Procurement
Distribution/Selling
0.19
0.33
0.52
0.20
0.11
0.35
TOTAL 1.04 0.66
! Jeeps and trucks were used in transporting corn from the supply areas to the
trader.
! From the supply area, farmers in Isabela incurred transportation costs at 19
centavos per kilogram while traders reported an average of 33 centavos for
transportation in procurement of corn from the farm level.
! For distribution/selling, transportation costs amounted to 52 centavos per
kilogram on the average via the Isabela to Bulacan/Manila/Rizal/Batangas route.
! In Cagayan, farmers incurred pre-marketing transportation costs of 20 centavos
per kilogram. From the farmer to the trader’s level, transport costs were
estimated at about 10 centavos. Traders spent 25 to 43 centavos or an average
of 35 centavos in transporting corn to the feed mills.
Material Inputs
In corn trading, minimal material inputs were used. For procurement, the
materials used were sack and tying materials. For selling, plastic bag and tying materials
were utilized. Table 15 presents the materials inputs and their corresponding costs.
Marketing Costs Structure for Corn 25
Table 15. CORN: Cost of material inputs incurred, by marketing participants, bypractice/activity/cost item, by province, 2000
Practice/Materials Used Isabela Cagayan
peso per kilogramProcurement
SackTying materialsPlastic bag
Selling Plastic bag Tying materials
0.060.002
0.0030.002
0.0550.002
0.01
TOTAL 0.067 0.067
! In Isabela, the costs of the material inputs were minimal ranging from 0.2
centavos to 6 centavos per kilogram.
! In Cagayan, material inputs also cost less than 10 (P 0.067) centavos.
Miscellaneous and Other Operating Costs
Marketing participants further incurred miscellaneous and other operating
expenses. Miscellaneous expenses paid even before the start of the business operations
were securing NFA license and local government business permit. Other cost items
included food expenses for hired laborers who performed shelling and drying. It also
covered expenses for meals and snacks and beverage while transporting the commodity.
Other items and their corresponding costs are presented in Table 16. Findings also
indicated the following:
Marketing Costs Structure for Corn 26
Table 16. CORN: Miscellaneous and other operating expenses,by province, 2000
Item Isabela Cagayan
peso per kilogramFoodRentalsNFA licenseLocal gov’t business permit*ElectricityShrinkageStorage feeGas and oilWeighing scale calibration feeOffice suppliesCommunicationRepairs and maintenanceInsuranceInterest on loanAgent’s commission**
0.0530.150.0040.0140.020.0070.150.040.0340.0010.0010.020.030.010.07
0.0020.010.0010.0040.001
0.003
0.01
TOTAL 0.604 0.031
* Local government business permit is estimated to be 10% of gross sales.** Agent’s commission includes commission paid to agent for supply procurement and
for linking with buyers/feed mills for traders who are not able to get purchase orderfrom feed mills.
! NFA license and local government business permit were paid annually and were
based on the volume of gross sales. In Isabela, these items cost around P0.004
and P0.014 for NFA license and local government business permit, respectively.
In Cagayan NFA license and LGU permit cost around P 0.001 and P 0.004,
respectively.
! Traders also paid for insurance of the vehicles and business building. The
premium was based on location of the establishment. The charges were relatively
higher in business centers. In Isabela it was estimated at 3 centavos per kilogram.
! Other operating expenses were paid, as the items or service were used/availed. In
Isabela, the items and their corresponding costs were electricity (0.02), gas and oil
(0.04), office supplies (0.001), communication (0.001), repairs and maintenance
Marketing Costs Structure for Corn 27
(0.02), shrinkage/wastage (0.007), storage (0.15), weighing scale calibration
(0.034).
! Traders engaged the services of agents. In reference to traders, there are two
levels of agent. One for procurement or between farmer and assembler-
distributors, and the other one for distribution or selling between assembler-
distributor and feed millers. For both levels, an agent was paid 7 centavos per
kilogram on the average.
! Traders also acquired loans from banks for business operations. They paid an
average of one centavo per kilogram for interest.
! In Cagayan, the miscellaneous and operating expenses were minimal.
Depreciation
Depreciation is the value given to the use of a fixed asset for a given period. The
study imputed depreciation costs for fixed assets (such as buildings), tools and equipment
used in marketing of corn. The costs were considerably minimal at 3.2 centavos and 5.2
centavos per kilogram in Isabela and Cagayan, respectively (Table 17).
Marketing Costs Structure for Corn 28
Table 17. CORN: Imputed costs of depreciation,by province, 2000
Facility/Equipment/Tool Isabela Cagayan
peso per kilogramRakeScooperContainerWeighing scaleOffice equipmentMechanical dryerPush cartTableSampler (“buriki”)Building (office/warehouse)VehicleCommunication facilitiesUmbrellaRent (tolda)
0.010.0010.0020.0010.0010.0010.0010.012
a/0.0010.0010.001
0.0020.006
0.04
0.0020.002
TOTAL 0.032 0.052
a/ less than 0.001
Aggregated Marketing Costs
The costs items were aggregated according to cash outlay, classified into cash and
non-cash/imputed. Table 18 presents the aggregated costs by cash outlay. Cash costs
consist of labor, material inputs, and other operating expenses. Non-cash costs include
depreciation. In Isabela, cash costs totaled P 2.862 per kilogram and non-cash costs
amounted to P 0.032 per kilogram. In Cagayan, the costs were P 1.09 and P 0.052
for cash and non-cash, respectively.
Total Marketing Costs
Table 19 presents the amount of major costs components incurred in Isabela and
Cagayan. The significant findings regarding these were indicated as follows:
Marketing Costs Structure for Corn 29
Table 18. CORN: Total marketing costs, by province, 2000
Cost Component Isabela Cagayan
peso per kilogramLabor
Transportation
Material Inputs
Miscellaneous and otheroperating expenses
Imputed Costs (depreciation
1.151
1.04
0.067
0.604
0.032
0.33
0.66
0.067
0.031
0.052
TOTAL 2.894 1.14
! The total costs borne by marketing participants were about P 2.90 per
kilogram in Isabela and P1.14 in Cagayan. In Isabela, labor accounted
for the biggest share of the cost at P1.151 while in Cagayan
transportation got the biggest share of 66 centavos per kilogram.
! The second cost item for which traders spent more was transportation
(P1.04) for Isabela and labor (P0.33) in Cagayan.
! Traders incurred the lowest cost for depreciation at P0.032 in Isabela
and P0.052 in Cagayan.
VII. PROBLEMS/CONSTRAINTS ENCOUNTERED
Farmers and traders encountered numerous problems in corn marketing. These
problems are enumerated in Table 19.
Marketing Costs Structure for Corn 30
Table 19. CORN: Common problems encountered by marketing participants,Isabela and Cagayan, 2000
Problem Isabela Cagayan
1) Poor quality commands low price2) Unpredictable weather condition3) Lack of information on frequent price
fluctuation4) Corn importation5) High interest rates6) Risk in accepting check payment7) Poor farm to market roads8) Insufficient capital for procurement9) Lack of drying facilities
912
1123223
221
1547113
! For both Isabela and Cagayan, the most common problem encountered by
marketing participants was corn importation. Traders stated that most of the
feed millers preferred to buy imported corn because of its quality and price,
which was cheaper than corn produced in the area.
! Farmers in Isabela complained of low price received for corn. However, they
were aware that the quality of corn affected the market price of their product.
! Traders in Cagayan preferred payment in cash as there was always the risk in
accepting check payment.
VIII. MONITORING OF MARKETING COSTS DATABY THE NATIONAL FOOD AUTHORITY
The National Food Authority monitors the marketing costs of corn in major
supply provinces on a monthly basis. The areas of coverage are Isabela and Cagayan in
Luzon; and North Cotabato, Bukidnon, South Cotabato and Sultan Kudarat in Mindanao.
The NFA monitors costs as borne by commercial traders, and costs incurred by the NFA.
Marketing Costs Structure for Corn 31
In Isabela, commercial traders incurred costs in their procurement and distribution
activities. The components of the marketing costs for procurement were handling (for
loading of sacks of corn into the vehicle), trucking or transportation, storage, sack
depreciation, insurance, interest on loan or the cost of money. For distribution, the cost
components were handling (unloading and loading), trucking, storage and interest on
loan.
In December 2000, the procurement costs amounted to 31 centavos per kilogram
while distribution costs was imported at 74 centavos per kilogram. The total costs were
around P1.05 per kilogram (Figure 5).
The computed selling price (ex-wholesaler) was about P7.55 per kilogram. This
amount was quite close to the result of the BAS marketing costs study at P7.39 (P4.50
buying price + total costs of P2.89).
IX. CONCLUSIONS AND RECOMMENDATIONS
The study covered only three provinces – Isabela, Cagayan and Nueva Ecija. The
conclusions and recommendations were confined or based on the results and findings in
these areas.
Tracing Approach
The general tracing approach started from the farm or the supply level to the
demand level or retail market. The study traced the flow of yellow corn that was used as
main ingredient in the manufacture of feeds for livestock and poultry. This indicates that
the final destination of corn in its grain form was the processor. Thus, the tracing
approach employed in the study ends at the processing level or at the feed mills.
In conducting similar studies in the future, the procedures will depend on the
major form by which corn is marketed at specific areas. For instance, if corn is
Marketing Costs Structure for Corn 32
consumed as rice substitute in major corn eating provinces, the tracing approach ends at
the retail markets.
Marketing Costs
The study traced the costs involved in moving corn produced in Isabela. Based
on BAS data, corn is produced in large quantities in some provinces in Mindanao. The
feed millers in Luzon also sourced corn from Mindanao provinces. The study covered
only the costs in marketing corn from Isabela. In the conduct of similar studies in the
future, the study recommends to cover Mindanao provinces to determine the costs
involved in the performance of activities in the inter-island movement of the commodity.
ANNEX
Marketing Costs Structure for Corn 34
Table 13a. CORN: Labor costs incurred by marketing participants,by activity/practice, Isabela, 2000
Practice/Activity/CostItem Farmer RA-LD PA-LD MA-LD Retailer
peso per kilogramShelling
Drying
Solar
Mechanical
Procurement
Handling
Piling
Loading a/
Unloading b/
Corn classification
Selling
Handling
Loading
Unloading
Weighing c/
Salaries and Wages
0.25
0.12
0.12
0.54
0.35
0.19
0.31
0.10
0.10
0.10
0.01
0.151
0.10
0.05
0.001
0.03
0.20
0.20
0.30
0.10
0.10
0.10
0.131
0.10
0.03
0.001
0.04
0.30
0.10
0.10
0.10
0.02
0.02
TOTAL 0.37 1.03 0.67 0.30 0.02
a/ Loading of corn grains from the farm to the truck/vehicle.b/ Includes unloading, weighing, piling (“kamada”).c/ Whole truckload is weighed using a truck scale.
Marketing Costs Structure for Corn 35
Table 13b. CORN: Labor costs incurred by marketing participants,by activity/practice, Cagayan, 2000
Practice/Activity/Cost Item RA-LD PA-LD PA-MD
peso per kilogram
Procurement
Handling
Loading
Unloading
Piling
Drying
Corn classification
Salaries and wages
0.19
0.19
0.10
0.09
0.02
0.04
0.07
0.07
0.07
0.06
0.08
0.04
0.04
TOTAL 0.25 0.13 0.08
Table 14a. CORN: Transportation costs incurred by marketing participants,Isabela, 2000
Practice Farmer RA-LD PA-LD MA-LDpeso per kilogram
Pre-marketingProcurementDistribution/Selling
0.190.400.50
0.300.57
0.300.50
TOTAL 0.19 0.90 0.87 0.80
Marketing Costs Structure for Corn 36
Table 14b. CORN: Transportation costs incurred by marketing participants,Cagayan, 2000
Practice Farmer RA-LD PA-LD PA-MDpeso per kilogram
Pre-marketing
Procurement
Distribution/Selling
0.20
0.11
0.43
0.11
0.38
0.10
0.25
TOTAL 0.20 0.54 0.49 0.35
Table 15a. CORN: Cost of material inputs incurred, by marketing participants,Isabela, 2000
Item Farmer RA-LD PA-LD MA-LD Retailerpeso per kilogram
ProcurementSackTying materials
Selling Plastic bag Tying materials
0.060.002
0.060.002
0.002
0.060.002
0.002
0.060.002
0.0020.003
TOTAL 0.062 0.064 0.064 0.064 0.003
Marketing Costs Structure for Corn 37
Table 15b CORN: Cost of material inputs incurred, by marketing participants,Cagayan, 2000
Item RA-LD PA-LD/ PA-MD Retailerpeso per kilogram
ProcurementSackTying materialsPlastic bag
SellingPlastic bag
0.050.002
0.060.002
0.07
0.01
TOTAL 0.052 0.062 0.08
Table 16a. CORN: Miscellaneous and other operating expenses incurred,by marketing participants, Isabela, 2000
Item Farmer RA-LD PA-LD/MA-LD Retailer
peso per kilogramFoodRentalsNFA licenseLocal gov’t businesspermit*ElectricityShrinkageStorage feeGas and oilWeighing scale calibrationfeeOffice suppliesCommunicationRepairs and maintenanceInsuranceInterest on loanAgent’s commission**
0.070.04
0.030.260.0020.0030.010.010.150.010.0040.0010.001
0.030.010.06
0.06
0.010.010.0040.003
0.070.020.0010.0010.020.030.010.08
0.0020.030.05
0.01
TOTAL 0.11 0.581 0.319 0.092
* Approximately 10% of gross sales.** Includes commission paid to agent for supply procurement and for linking buyers/feed mills to
traders who are not able to get purchase order from feed mills.
Marketing Costs Structure for Corn 38
Table 16b. CORN: Miscellaneous and other operating expenses incurred,by marketing participants, Cagayan, 2000
Item RA-LD PA-LD/PA-MD Retailer
peso per kilogram Food Rent
Local govt business permitElectricityNFA licenseWeighing scale calibration
0.002
0.0030.0010.0010.006
0.002
0.010.0010.009
0.01
0.0040.0010.001
TOTAL 0.013 0.022 0.016
Table 17a. CORN: Imputed costs of depreciation incurred, by marketingparticipants, Isabela, 2000
Facility/Equipment/Tool Farmer RA-LD PA-LD/MA-LD Retailerpeso per kilogram
RakeScooperContainerWeighing scaleOffice equipmentMechanical dryerPush cartTableSampler (“buriki”)Building (office/warehouse)VehicleCommunication facilities
0.010.010.02
a/a/
0.0040.0010.0010.001
a/0.0010.0010.001
a/a/
0.0040.001
0.001
a/0.0010.0010.001
a/
0.012
TOTAL 0.04 0.10 0.09 0.012
a/ less than 0.001.
Marketing Costs Structure for Corn 39
Table 17b. CORN: Imputed costs of depreciation incurred by marketingparticipants, Cagayan, 2000
ITEM RA-LD PA-LD/ PA-MD Retailer
peso per kilogramRake
Scooper
Weighing scale
Sampler (‘buriki”)
Umbrella
Tent (tolda)
0.002
0.002
0.03
a/
a/
a/
0.002
0.006
0.05
a/
a/
a/
0.008
0.03
0.05
0.04
TOTAL 0.034 0.058 0.13
a/ less than 0.001.
Marketing Costs Structure for Corn 40
Table 20. CORN: Marketing costs structure (cash costs and imputed costs),by province, 2000
Cost Item Isabela Cagayanpeso per kilogram
Cash Costs
Labor Shelling Handling Corn classification Weighing Drying Salaries and wages
Transportation Pre-marketing Procurement Distribution
Material Inputs Sack Tying materials (twine) Plastic bag
Other Operating Expenses Food Rental NFA license Business permit/license b/ Electricity/Light Shrinkage/wastage Storage fees Gas and oil Weighing scale calibration Office supplies Communication Repairs and maintenance Insurance Interest on loan Agent’s commission
2.862
1.1510.250.440.010.0010.410.04
1.040.190.330.52
0.0670.060.0040.003
0.6040.0530.150.0040.0140.020.0070.150.040.0340.0010.0010.020.030.010.07
1.09
0.33
0.210.02
0.060.04
0.660.200.110.35
0.0670.0550.0020.01
0.030.0020.010.0010.0040.001
0.003
0.01
Marketing Costs Structure for Corn 41
Table 20 (continued)
Non-Cash Cost
Imputed Cost (Depreciation) Rake Scooper Container Weighing scale Office equipment Mechanical dryer Push cart Table Sampler (“buriki”) Building (office/warehouse) Vehicle Communication facilities Umbrella Tent (“tolda”)
0.032
0.0320.010.0010.0020.0010.0010.0010.0010.01
a/0.0010.0010.001
0.052
0.0520.0020.006
0.04
a/
0.0020.002
TOTAL 2.894 1.14
a/ Less than 0.001.b/ Approximately 10% of gross sales.