Neophyte Couple In Agribusiness Who Did The Wrong Things

Jess Domingo answering questions at the Agribiz Kapihan.

While listening to Jess Domingo at the Agribiz Kapihan recently, all of a sudden we were reminded of a couple in their early 40s who came to our office. They were haggard-looking, worried and in a quandary because they were not sure what they should do.

They came to us to ask our opinion regarding planting Gmelina, a fast-growing tree species that could be made into lumber, furniture, banana props and other uses. They wanted to know if it was all right for them to plant Gmelina because a friend had suggested to them to plant the tree.

Well, they were at a loss on what to do because their bank had given notice that their 16-hectare property in Tarlac would be foreclosed if they could not settle the P10-million they borrowed in 1995 which had ballooned to P16-million because of the floating interest rate. They borrowed the money when the economy was doing well and the banks were very liberal in giving out loans to who whoever was in need of capital.

The couple did not have any experience in agribusiness but they were excited to become broiler contract growers because their neighbor was making a lot of money as a contract grower of a big company. They put up two huge tunnel-vent poultry houses that could accommodate at about 100,000 chicks per loading. They had figured that if they could net even just P10 per bird,that could give them at least a million bucks in a growing cycle of 1.5 months.

But that did not happen. Because of the 1997 financial crisis, business was slow and the integrators reduced their production targets. And so not all the expensive chicken houses were filled up. Which meant, there was no income from the unused buildings.

Why did the lecture of Jess Domingo remind us of the worried couple? Because they did the opposite of what Jess advised in his talk. The two were just starting in agribusiness and they started too big. Jess said that if you are new in the business, you should start small and expand as you get to know the ins and outs of the business.

Jess also emphasized that if you are just a neophyte, it is best to use your own money. Don’t borrow, especially from the bank.If you must, borrow from your relatives and friends who would not be as aggressive in going after your collateral. But if you have to borrow from the bank, borrow only 30% of the needed capital.

Jess also suggested that you “borrow long and invest short”. What does that mean? Don’t borrow money that you should pay in one year. You ask for a longer time to pay, say five years. That will give you enough time to raise money to pay your loan. How about “invest short’? What does that mean? Well, you should use the borrowed money to produce crops or any other farm produce that will bring in revenue in the shortest possible time. Just like if you produce Japanese cucumber that is harvestable in 45 days and you have the market for it, you would be able to have an early cash flow so you can amortize your loan on time.

Well, I didn’t advise the couple to go into tree planting because that will not give them revenue in the short term. They will have to spend money in establishing the tree plantation and that will take years before they could make their first harvest.

By the way, Jess Domingo retired from his corporate executive job at 55 to pursue his passion for farming. He owns Rancho Domingo in Alfonso Lista, Ifugao where he practices natural farming

Jess Domingo with his free range chickens.
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