If there is City of Dreams Manila, we have our small Field of Dreams Quirino. A quote from John Maxwell’s Facebook page says:
All progress takes place outside the comfort zone. – Michael John Bobak
Maxwell further added “If you are comfortable, you are not growing.” To start the year, we shared some new investment options for 2016 and included in the options is farmlands. For the charitable-Ilocana* and I, investing in a farm land is way beyond our investment appetite given the large capital outlay, it is pretty much a leap of faith. Way outside our comfort zone, but we had to jump, to start fulfilling our field-of-dreams (literally).
It’s just a small farm really, good enough for us starters. 2 hectares (20,000sqm) inclusive of irrigation canal, at PHP40/sqm. Around 18,200sqm is usable, the rest is for the irrigation. Of the 18.2K sqm, maybe around 16K sqm is now being used for planting palay (rice) while 2K is on an elevated portion where a nice small hut sits (resting place of farmers), plus some trees good for lumber. We plan to convert this 2K sqm into an irrigated rice field as well, then fill the boundaries not by trees for lumber but by mango and coconut trees. Dreams.
The title for the rice field is actually a CLOA – Certificate of Land Ownership Award. And the title is not even the usual TCT (transfer certificate of title) but actually OCT (original certificate of title), which means the previous owner is the original original owner. The farmland was awarded to the owner by the government as part of its Agrarian Reform programs.
Transferring a CLOA title is not too different from transferring a usual TCT, the general details of which may be found here: Step by Step Guide on Land Title Transfer. Just a few additional considerations that we learned along the way:
- CLOA titles have annotations where the owner cannot sell the property within x years from date of awarding (e.g. 5 or 10 year period), or if selling within this sort of lock-in period, only to dependents and buyers stipulated in the CLOA (usually children). As such in buying CLOA, Juan should abide by this stipulation.
- Clearance from Landbank, just to make sure that the awarded farmland has no outstanding obligations from Landbank, as ricefields were awarded in exchange for a sum of money (much smaller than market rates), and awardees have the option to pay in full or in installments
- Certificate of No Tenancy – this is to make sure that there will be no tenants or farmers that will be displaced due to the transfer of ownership
Since the ricefield is irrigated (and rice planting really needs lots of water), the farm is able to come up with 3 planting-harvest cycles per year. In provinces I’ve been where rice planting is not irrigated and is only dependent on rainfall, harvest cycle is only 1 to 2 per year. This is another crucial factor to consider in buying a farmland – whether it is irrigated, and whether what you will plant needs lots of water. Especially nowadays when El Nino ravages the farms of our poor farmers. Being irrigated is not even a guarantee since some irrigation sources also dry up or are rationed during hot seasons.
So far, and as expected, the best planting season we have experienced is the Jan to April when summer is peaking and there is very low chance of typhoons. The farm yielded 155 cavans of palay.
We haven’t experienced the May to August cycle since we just got the farm last September. But we’re expecting that the May to August cycle is slightly better than September to December since the latter is prone to heavy rains and typhoons. Yes ricefields need water but once it approaches the harvest season and the rice grains start to turn golden, when the actual bigas grains form, it should not get wet (or worse deluged in water), otherwise it will stump the growth of the grains, the grains might fall from the stalks, or start decaying. Sayang.
For now, we wanted to make the farm a purely passive income source so as much as possible, we don’t spend and invest additional capital in the actual rice planting. In short, we just wait for actual gains. This is also because we’re still paying for the monthly amortization of the unsecured loan we availed to pay for the farm.
Our set-up with farmers is 80-20 which is common in Quirino province. The farmer will get 80% of the net proceeds of the harvest, but s/he will also spend or arrange for everything, rent for tractor and land tilling, wages of other farmers who help out in planting and harvest, fertilizers, pesticides, dues to use of irrigation etc. The land owners will then get 20% of net proceeds, for allowing use of the land.
Is this a just and fair way of sharing? I don’t know but as of the moment, that is the practice among them. I don’t mind not getting the lion’s share of the harvest since I did not exert much effort and capital anyway of making the harvest possible. I just hope the farmers also find their 80% share enough.
Key risk though is during the lean months and rainy seasons. In one instance, we have a pawned land (owner needed cash so he pawned his land to us, we gave him cash while we have rights for 3 harvests in his land, until he’s able to give back the cash in lump sum).
Anyway, the pawned land is 7,000sqm but harvest last December was affected by typhoon Lando. The harvest only yielded 15 cavans of palay, and we got 3 cavans. Sad.
Imagine the effort of farmers, working hard for 4 months, just to get 12 cavans of palay. Removing the husks and all, and converting palay to bigas, the 12 cavans of palay might be only worth 6 to 7 cavans of bigas. And we’re talking about gross terms, still excluding other expenses incurred along the way.
Investing in agriculture and farming is really tough for investors, but more so for farmers. More so for those whose only source of income is farming. They have to work hard and toil for 4 months before seeing harvest, and yet there is no guarantee as to how much they will reap during harvest.
But if it’s among your passive income sources, lucky you. Be grateful, be thankful, and be nice to farmers who work hard just to give our country our staple food of rice.
As for the charitable Ilocana and I, we remain committed and gung-ho in growing our farmland investments and passive income, despite the challenges and risks. After all, no investment is risk free. And if we’re comfortable, we are not growing.
*My idol Francis Kong fondly calls her wife the Ilocana. So nakikigaya lang talaga ako. I hope he did not copyright such term of endearment in his blogs.