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Brown Rice Market Chain and Marketing Practices, Luzon, Philippines

Article  in  Philippine Agricultural Scientist · May 2011

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Isabelita Manalo Pabuayon Antonio Jesus Quilloy

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PHILIPP AGRIC SCIENTIST ISSN 0031-7454
Vol. 94 No. 1, 54-65
March 2011

Brown Rice Market Chain and Marketing Practices, Luzon,

Philippines
Isabelita M. Pabuayon* and Antonio Jesus A. Quilloy
Department of Agricultural Economics, College of Economics and Management, University of the Philippines Los
Baños, College, Laguna, Philippines
*
Author for correspondence; e-mail address: isabelitampabuayon@yahoo.com; Tel./Fax: 63-049-536-3292

The study involved an analysis of the brown rice market in selected provinces of Luzon,
Philippines. Brown rice comprised a small portion of the rice market with 10 producers
included in the study, having an annual output of approximately 397 metric tons only.
The market chain consisted of producers, market intermediaries and consumers. Scale
of production varied considerably, from small individual farmers to large cooperatives.
The market chains were relatively simple involving at most two market intermediaries,
i.e., the wholesaler/distributors and the retailers. Big producers were linked to markets
via established and extensive marketing networks of NGOs while the small ones sold to
households within their respective localities. Value-addition in the form of grading/
quality control, re-packaging, labeling or delivery to higher-level markets was done
mainly by those who carried a brand name or sold in established wholesale and retail
markets. Such value-addition provided financial incentives as reflected in the price
increase through the chain. Except for one, the market participants earned positive net
returns, given the current scale of operation and market capacity. Estimated monthly
consumption of brown rice was low at 6.75 kg per household. Non-use or discontinued
use of brown rice was due to its high price, not being readily available, poor eating
quality and the limited information about it among consumers. Constraints in the supply
chain were related to the lack of drying facility for palay (paddy rice) during
unpredictable weather conditions, lack of rice mills specifically designed for brown rice
and the limited local market for small producers.

Key Words: brown rice, constraints, market chain, price

INTRODUCTION Despite these benefits, brown rice currently

As defined by the Asia Rice Foundation (ARF), “brown
rice is unpolished whole grain rice that is produced by
removing only the hull or husk using a mortar and pestle
or rubber rolls” (www.asiarice.org/sections/whatsnew/
brbulletin.html). The brownish coating of the dehulled
rice grain is rich in nutrients. Based on the various ARF
reports, brown rice has several advantages over white or
polished rice (www.asiarice.org/sections/chapters/.../
ARF-Phil-Prog.html). Its milling recovery is 10% higher
than that of white rice, thus aggregate rice supply could
potentially increase with more production of brown rice.
Milling involves lower energy cost due to shorter milling
process which could increase financial returns to
producers. Finally, higher consumption of brown rice
could contribute to improved nutrition due to its health
benefits.
comprises a very small share of the household rice
basket. One reason is the apparent lack of information
about brown rice. Cuyno (2003) noted several drawbacks
in the brown rice business. Brown rice is more expensive
than white rice, is not readily or conveniently available,
has a shorter shelf life and gets rancid if stored beyond 4–
6 wk due to the high fat content in the bran, has a coarse
texture and a “dirty” look, is susceptible to storage weevil
and entails longer cooking time. In her study of
consumers in Los Baños, Laguna, Reforma (2007)
reported that there is limited knowledge on the exact
nutritional benefits from brown rice and where the
product could be sourced. On the whole, the market chain
of brown rice is not well understood. Pabuayon et al.
(2009) indicated that analysis of the market chain could
identify the key production and marketing constraints and
provide recommendations for improving the distribution

54 The Philippine Agricultural Scientist Vol. 94 No.1 (March 2011)

 Brown Rice Market Chain and Marketing Practices
system for the benefit of producers, marketing agents and
consumers.
This study aimed to: 1) characterize the market chain
for brown rice; 2) analyze the marketing practices, price
structure and net returns of the different market
participants; 3) identify the key constraints in the supply
chain; and 4) propose measures for addressing constraints
toward promoting the production and consumption of
brown rice.
Analytical Framework
Analysis of the market chain (here alternatively referred
to as supply chain or production-to-consumption system)
involves identifying the key market players and their
roles, determining the financial returns obtained by these
players from production and marketing activities, and
pointing out the constraints vis-à-vis the logistical
requirements in the chain. Figure 1 shows the system
starting from procurement or production of raw material
(palay) and related activities such as drying, grading and
storage; followed by processing or milling (i.e.,
conversion of palay into brown rice) including quality
control, packaging and labeling of the final product; and
then product distribution and related activities such as
transport, pricing, re-packaging and branding; until it gets
into the hands of consumers.
Key questions relate to the economic costs and
benefits of performing the above activities; the
distribution of the final product value according to the
economic contribution of the market players involved in
making the product available to the consumers in the
right form, time and place; and the availability of
logistical requirements at the various stages in the supply
chain. Efficient operations, coupled with adequate market
demand, translate to profitable operations which, in turn,
provide incentives for continuous and even expanded
production and marketing investments. The various
activities are undertaken by the market players consisting
of producers and market intermediaries who link the
former to the end-users. Under competitive conditions,
the market players receive returns from their operations
corresponding to their functions and services equal to the
opportunity cost of capital, over and above payments for
all expenses incurred. Throughout the chain, there could
be some constraints which affect the flow of brown rice
from the producer through the market intermediaries to
the consumer.
The Philippine Agricultural Scientist Vol. 94 No.1 (March 2011)
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Isabelita M. Pabuayon and Antonio Jesus A. Quilloy
Fig. 1. Conceptual framework for analyzing the market
chain of brown rice.
METHODOLOGY
Socio-economic surveys were conducted to obtain
primary data on brown rice production and marketing
operations covering the year 2009. Respondents included
10 producers from seven provinces in Luzon, three
traders with two of them based in Metro Manila and one
in Laguna, and 116 consumers, majority of them from
Laguna. One producer in Laguna did not provide
information, hence, was not included in the study. Being
few, producers were located through referrals and
consultations. The producers then identified their market
outlets. Consumers were selected purposively in
production areas as referred to by producers and key
informants.
Respondents were personally interviewed by the
research team. Data were organized and summarized
using descriptive statistics and then presented in tabular
and graphical forms. Analysis covered information for
the year 2009. The geographical flow of the product from
production areas to consumption and market centers and
its movement from the producer through the wholesaler/
distributor to the retailer, and finally to the consumer,
were traced through market chain analysis. Several
market chains were identified and for each chain and for
the market participants comprising each chain, the
following were estimated: volume and value of purchases
of the raw material or product, costs of production and
marketing/value-adding activities, prices at different
market points, volume and sales value, and net return. Per
unit net return of producers was determined using simple
cost and return analysis; for traders, by deducting the
marketing costs from the marketing margin. The margin
is the difference between the selling price and the buying
price. The distribution of the final product value or retail
price among the different market participants was
obtained from their respective value shares.
55