LONG before harvests reach consumers, the true economic value of an agricultural product is decided at the processing plant.
Agri-food processing, the systematic transformation of raw agricultural yield into shelf-stable, safe and nutritious goods, is the critical bridge between rural farming and industrial growth.
It entails a number of activities in the processing stage: primary — like cleaning, sorting and grading the raw material; secondary — turning ingredients to daily foods (e.g., milk to cheese, coconut to oil or coco milk); and tertiary — creating processed foods like ready to eat meals and snacks.
Each of the stages in the agri-food processing system requires a lot of workers. Promoting the sector’s development will therefore be highly suited to the Philippines development effort given our rich natural resources that are capable of producing various farm products.
Agri-food processing is at the core of the agri-industrialization thrust. Agri-food processing requires the application of good management, financial skills, science and innovation similar to what industrialization demands if the industrial venture is to become successful.
Besides its labor-absorbing feature, the development of agri-food processing addresses various needs of the country. It offers alternative employment opportunities among the rural folks, who are considered as the poorest of the poor in the country.
Most of the raw materials it requires are sourced locally, thus gaining greater value-added for the economy. It promotes balanced regional development since the rural areas, away from Manila, are the places where the farms will be targeted for development and the processing plants will be built. It is not capital-intensive, and hence, will not contribute to our growing fiscal deficit.
Despite a clear comparative advantage in several globally demanded crops, the local agri-food processing sector has struggled to take off. The data makes this starkly clear: only three of our agricultural exports generate more than $400 million per year.
In 2025, these top performers were coconut and coconut oil ($3 billion), bananas ($1.3 billion) and pineapples ($800 million). In contrast, neighboring countries like Thailand, Malaysia, Vietnam and Indonesia each boast more than 10 agri-export commodities valued at $400 million or more.
Going deeper into the data of our agri-export products makes one realize how we fared badly despite rhetoric from our politicians and policymakers that agri-industrialization will be promoted as a vital cog of the country’s development strategy.
More than 3.5 million hectares of our agricultural land are devoted to coconut farming, yet the sector only manages to generate just $3 billion in export value. In contrast, banana (500,000 hectares) and pineapple (70,000 hectares) production — concentrated primarily in Mindanao — occupies a fraction of that footprint, yet generates a combined $2.1-billion export revenues.
This stark contrast underscores the severe inefficiency choking our coconut industry alongside the modern, high-yield commercial operations driving the banana and pineapple sectors.
Note also that the coconut sector is heavily regulated by the government while the banana and pineapple industries developed in Mindanao with little support and attention from the same government located in faraway “Imperial Manila.”
The cases of coconut, banana and pineapple also demonstrate why we cannot develop the agri-food processing sector in the country. Low farm productivity is the main reason why we cannot develop other coconut by-products demanded in the world market. We produce an inadequate supply of coconut raw materials.
In contrast, downstream products from bananas and pineapples have grown and expanded because we have relatively abundant supply from their more efficient farms. Products like banana catsup, banana chips, banana cakes, smoothies, among others, are made from processed bananas.
For pineapples, we have processed the raw materials into juice, chunks, tidbits, crushed and even exported vacuum-packed pineapples.
All these downstream activities have generated thousands of jobs for our rural workers, earned higher incomes for them, and generated millions and even billions of foreign exchange revenues for the country.
But can we do the same for other agri-products highly demanded in the global market such as coffee, cacao, durian, mango, avocado, papaya, pili, jackfruit, soursop, okra, and more recently, ube?
The answer is that we cannot in the short and even medium term. The main obstacle is the low farm productivity across these different crop commodities.
I was part of a team which was commissioned by the Department of Trade and Industry, funded by a multilateral financial institution, to find ways of bolstering the development of our micro, small and medium enterprises (MSMEs) engaged in agri-food processing and exporting. It covered commodities like coffee, cacao, mango, durian, pili, bangus, sardine-making, vegetables for kimchi and ube.
What we discovered as the primary obstacles to the further growth and expansion of our MSMEs were two factors. One was the lack of adequate and timely supply of quality raw materials because of low productivity among farms engaged in their production. And two, MSMEs were unable to expand access to the global market as they were not properly informed or trained by the government on understanding how to comply with the high sanitary and food standards of importing countries, particularly in the developed economies.
We all know why low farm productivity persists in the country. It is due to the unending implementation of agrarian reform that makes it impossible to cluster or consolidate farmlands to achieve economies of scale.
As to expanding access to the global market, our agencies are geared toward regulating entry of imported agri-food items under the guise of protecting our producers or nationalism. Most of the personnel hired under such agencies are hell-bent on being assigned to regulatory units, rather than to its development wing, because it is in the former where one can earn extra revenue.
Informing, educating and training potential exporters on food and safety standards of importing countries will only yield training fees but will never provide the opportunities to those involved in it to accumulate massive unexplained wealth.
If the government can just address these twin problems hounding our agri-food processing system, it could have done a lot in promoting agri-industrialization. Instead, it keeps on imposing regulatory measures that have the effect of stifling the growth of this critical sector in our economic development effort.
fdadriano88@gmail.com
