Undergrad Thesis: Consumers' Willingness to Pay for Organic Rice in General Santos City

CONSUMERS’ WILLINGNESS TO PAY FOR ORGANIC RICE IN GENERAL SANTOS CITY

ANDRE KAREN R. DE LA CERNA

SUBMITTED TO THE FACULTY OF THE SCHOOL OF MANAGEMENT UNIVERSITY OF THE PHILIPPINES MINDANAO

FOR THE DEGREE

BACHELOR OF SSCIENCE IN AGRIBUSINESS ECONOMICS 1

ABSTRACT

Consumers’ Willingness to Pay for Organic Rice in General Santos City

Andre Karen R. De la Cerna

Bachelor of Science in Agribusiness Economics

Andre Karen Karen R. De la Cerna. Consumers’ Consumers’ Willingn Willingness ess to Pay for Organic Organic Rice in General General Santos City. [A paper for Agribusines Agribusinesss Economics Economics 200, Undergradu Undergraduate ate nd Thesis, 2 Semester of 2008-2009, under Prof. Aurelia Luzviminda V. Gomez, 64  pages]. The main purpose of the study study was to derive the willingness willingness to pay estimates for organic rice in General Santos City using the Contingent Valuation Method. Specifically, the study aimed to describe consumers’ awareness regarding organic rice, to analyze the factors that can influence the WTP for organic rice and to assess & compare the factors that can affect the WTP for organic rice among income classes. Quota Quota Sampli Sampling ng Method Method throug through h Known Known Group Groupss and purpo purposiv sivee sampli sampling ng were were utilized utilized in this study. The three income income classes (high, (high, middle, middle, low) were the known groups. The study utilized some attitudinal, attitudinal, awareness and demographic factors that can possibly affect the consumers’ consumers’ willingness willingness to pay for organic organic rice and subjected subjected these factors to a Binary Logistic Regression Regression Model. Of all the factors considered considered in the study, only respondents’ past purchase of organic rice, respondents’ willingness to   buy if organic rice is more available, respondents’ awareness regarding pesticide residues, and monthly household income were found to be statistically significant for  the OVERALL WTP Model; Respondents’ willingness to buy if organic rice is more available, respondents’ awareness regarding pesticide residues, and household size for  HIGH Income Class’ WTP Model; Respondents’ willingness to buy if organic rice is more available available and respondents’ respondents’ were found found significant significant in determining determining MIDDLE Income Income Class WTP Model. On the average, responden respondents, ts, who were willing willing to pay a  price premium, are willing to pay 31-40% 31-40% price premium for organic rice. The study also verified that HIGH Income Class respondents were the ones more willing to pay and had higher willingness to pay for organic rice compared to the lower income classes. The findings of this study can serve as inputs for the Local Government Government Unit of General Santos City on making or deciding deciding policies and programs for the welfare of both organic rice farmers and consumers. 2

ACKNOWLEDGEMENT

During the course of my thesis writing and college life, I have been fortunate in receiving a lot of support and help, in one way or another, from various people and offices. A one-page acknowledgement acknowledgement is never enough to thank ALL of them. Financial support from UPMFI is gratefully acknowledged, as without the monthly stipend, it would have been impossible for me to survive in UPmin. I am most indebted to Prof. Luz Gomez, my adviser, who not only gave me a lot of help on this work, but also helped me in some of my finances in the last three months of my stay in UPmin. It was her who subsidized the binding and printing of  this thesis. thesis. Her comments comments on the draft of this study have contributed contributed greatly greatly to the successful completion of the final version. I benefited a lot from the comments and suggestions of my panelists - Mr. Shuck and Mr. Hualda. They really provided time and effort for this thesis to make make it sound good. I would also like to thank Ms. Dee, Ms. Malou and Ms. Flo for their  encour encouragi aging ng words words and discussi discussions ons for us gradua graduatin ting g studen students ts to believ believee in our  capabilities. Special thanks are due to some people of CAO, TACDRUP, NSO, Barangay Halls of Lagao and San Isidro Isidro and to all of the respondents respondents of this study. study. Without Without these people, this thesis would be as dull as an empty glass. I would like to express my gratitude to Hannee and Bam-bam who guided and accompanied accompanied me during during the data collection collection period. period. To Abe, Marj, Kuya Kuya Resmar, Kuya, Ate Rox and Tita Buds, who allowed me to borrow their desktops or laptops and granted me no fees for printing in some points of the thesis writing process, thanks a lot. To my hardworking and cool ABE classmates, Ate Rox, Nades, Marj, Fritz, Ya Resmar, Tina, Ate Jane, Ya Rodel, Ate Princess, Ate Cheng, Ate Tamin, Nor, Mon, Llana, Yhang, Sheen, Ya Nikko, Jenny, and Tel, thank you for the fruitful years we shared. To my HS barkada, Bes, Wena, Wed, Let, Han, Ray, Rang, Rang, Kuya, and to my college friends, Meng, Ray, Van, Joice, Tita Ray, Chen, Niña, Jewel, and Myca, thank you for the help, fun and encouragement you provided me. Super thank you friends. Exceptional thanks to my family specially mama, mommy, lolo, ate niña, tita  buds,  buds, my uncles and my siblings. siblings. I will ceaselessly ceaselessly be indebted indebted to your love, care, and help. Without their endless support, I would not be this inspired inspired to work hard for  this study and for my entire college study. study. I really owe a lot!!! Last Last but but not not defin definit itel ely y the the leas least, t, to our our Almi Almigh ghty ty Fath Father er,, who who prov provid ides es everything we need, thank you Lord.

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TABLE OF CONTENTS

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Thesis Thesis Manu Manuscr script ipt Appr Approva ovall …………… …………………… ……………… ……………… ……………… ……………. ……. Titl Titlee Page Page ………… ……………… ………… ………… ………… ………… ………… ………… ………… …….. ..…… ………… ………… …… Abstra Abstract ct ……………… ……………………… ……………… ……………… ……………… ……………. ……..…… .…………… ………….. ….... Ackno Acknowled wledgem gement ent ……………… ……………………… ……………… ……………… ……………… ……………. ……..…… .…….. .. Table Table of Conten Contents ts ……………… ……………………… ……………… ……………… ……………… ……………. ……..…… .……… … List List of Tables Tables ……………… ……………………… ……………… ……………… ……………… ……………. ……..…… .…………. ……... List List of Figure Figuress ………… ………………… ……………… ……………… ……………… ……………… ………….. …..……… …………. …. List List of of Appe Appendi ndices ces ……………… ……………………… ……………… ……………… ……………… ……………. ……..…… .…….. ..

i ii iii iv v vii viii viii ix

Chapter 1. INTRODUCTION 1.1 1.1 Back Backgr grou ound nd…… ………… ………… ………… ………… ………… ………… ………… ………… ………… …….. ..… … 1.2 1.2 Stat Statem emen entt of the the Pro Probl blem em ……… …………… ………… ………… ………… ………… ………… ……… … 1.3 1.3 Obje Object ctiv ives es of of the Stu Study dy ……… …………… ………… ………… ………… ………… ………… …….… .….. .. 1.4 1.4 Sign Signif ific ican ance ce of the the Study Study ……… …………… ………… ………… ………… ………… ………… …….. .... .. 1.5 1.5 Scop Scopee and Lim Limita itati tion onss of the the Study Study ……… …………… ………… ………… ………… ……… … 1.6 1.6 Defin Definit itio ion n of Term Termss …………… ………………… ………… ………… ………… ………… ………… ………. ….

1 3 5 5 6 7

Chapter 2. REVIEW OF THE RELATED LITERATURE AND STUDIES 2.1 Motive Motivess for for Buying Buying Organi Organicc Prod Product uctss ……………… ……………………… ……….…. .…... .. 2.2 Estima Estimatio tion n of Willin Willingne gness ss to Pay Pay (WTP (WTP)) …………… …………………… …………… …… 2.3 2.3 Cont Contin inge gent nt Valua Valuati tion on …………… ………………… ………… ………… ………… ………… …….. ..…… …… 2.4 Elicit Elicitatio ation n Techni Techniqu ques es ……………… ……………………… ……………… ……………… ……………. ……. 2.5 Binary Binary Logist Logistic ic Regres Regressio sion n ……………… ……………………… ……………… ……………… ……….. 2.6 2.6 Rela Relate ted d Studi Studies es ………… ……………… ………… ………… ………… ………… ………… ………… ………… ……

8 9 10 11 12 13

Chapter 3. METHODOLOGY 3.1 3.1 Theo Theore retic tical al Frame Framewo work rk …………… ………………… ………… ………… ………… ………… ………. …... .. 3.2 Empiric Empirical al Framewo Framework/ rk/Dat Dataa Anal Analysi ysiss ………… ………………… ……………… ………….. ….. 3.3 3.3 Data Data Coll Collect ectio ion n ……… …………… ………… ………… ………… ………… ………… ………… ………… …….. ....

18 19 22

Chapter 4. RESULTS AND DISCUSSIONS 4.1 Socio-demog Socio-demographic raphic Profile 4.1.1 Age …………………………………………………… 4.1.2 .1.2 Gende enderr ………… ……………… ………… ……… …………… ……………… ………… …….… .….. .. 4.1.3 .1.3 Civil ivil Stat Status us ………… ……………… ………… ………… ………… ………… ………… ……… … 4.1. 4.1.4 4 Educ Educat atio iona nall Atta Attain inme ment nt and and Year Yearss of Scho School olin ing g …….. …….. 4.1.5 .1.5 House ouseho hold ld Size Size ………… ……………… ………… ………… ………… ………… ……… …. 4.1. 4.1.6 6 Soci Socioo-ec econ onom omic ic Clas Classs ………… ……………… ………… ………… ………… …….. .... 4.2 Awareness Awareness Levels Levels 4.2. 4.2.1 1 Awar Awaren enes esss rega regard rdin ing g Orga Organi nicc Rice Rice ………… ……………… ………. …... 4.2. 4.2.2 2 Know Knowle ledg dgee rega regard rdin ing g Sust Sustai aina nabl blee Agri Agricu cult ltur uree ………. ………. 4.2. 4.2.3 3 Know Knowle ledg dgee abo about ut Pest Pestic icid idee Res Resid idue uess ……… …………… ………. …... .. 4.2. 4.2.4 4 Know Knowle ledg dgee rega regard rdin ing g Wa Wate terr Pol Pollu luti tion on ………… ……………… …….. 4.3 Attitudinal Attitudinal Characteristic Characteristicss 4.3. 4.3.1 1 Past Past expe experi rien ence ce of of Pur Purch chas asin ing g Org Organ anic ic Rice Rice ………… ………… 4.3. 4.3.2 2 Impo Import rtan ance ce atta attach ched ed to Pric Pricee ………… ……………… ………… …….… .…… … 4.3. 4.3.3 3 Will Willin ingn gnes esss to to Buy Buy if Orga Organi nicc Ric Ricee is is mor moree ava avail ilab able le .. 4.3. 4.3.4 4 Impo Import rtan ance ce atta attach ched ed to Pack Packag agin ing g ………… ……………… ………… …… 4.3. 4.3.5 5 Impo Import rtan ance ce att attac ache hed d to Cert Certif ific icat atio ion n ………… ……………… ………. …. 4.3.6 4.3.6 Respon Responden dents’ ts’ respon response se about about farmer farmerss must must engage engage in

26 26 27 27 28 29 30 31 32 32 33 34 34 35 35 36 5

sustainable agricultural practices …………………….. 4.3.7 4.3.7 Respon Responden dent’s t’s beli belief ef that that chemic chemicals als have have nega negativ tivee effects in the environment …………………….……… 4.3. 4.3.8 8 Regu Regula larr con consu sump mpti tion on of rice rice ………… ……………… ………… ………. …... .... .. 4.3. 4.3.9 9 Regu Regula larr pric pricee of rice rice ………… ……………… ………… ………… ………… ………. …... 4.3. 4.3.10 10 Will Willin ingn gnes esss to Pay Pay for for Org Organ anic ic Rice Rice ……… …………… ………… …….. 4.3. 4.3.11 11 Reas Reason onss for for buyi buying ng Orga Organi nicc Ric Ricee ……… …………… ………… ………. …. 4.3. 4.3.12 12 Reas Reason onss for for not not buyi buying ng Orga Organi nicc Rice Rice ……… …………… ………. …... .. 4.4 Willingness Willingness to Pay (WTP) (WTP) Models 4.4.1 .4.1 MID MIDDLE DLE Inco Incom me Clas Class’ s’ WTP WTP Mo Model del ……… …………… ………. …... 4.4.2 .4.2 HIGH IGH In Income come Clas Classs’ WT WTP Mod Model el ……… …………… ……… ……… 4.4.3 .4.3 OVER VERALL ALL WTP Model odel ………… ……………… ………… ………… ………. …... .. 4.4.4 .4.4 Mode Models ls’’ Per Perfo form rman ance ce ……… …………… ………… ………… ………… ………… ……

36 37 37 39 41 41 43 44 45 47

Chapter 5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 5.1 Summ Summary ary and and Conclu Conclusio sions ns …………… …………………… ……………… ……………… ………….. ….. 49 5.2 Recomm Recommend endatio ations ns ……………… ……………………… ……………… ……………… ………….… ….…….. ….. 51 Referen References ces ……………… ……………………… ……………… ……………… ……………… ……………… ……………… ……………. ……. Append Appendice icess ……………… ……………………… ……………… ……………… ……………… ……………… ……………… …………… ……

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LIST OF TABLES

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Tables 4-1 4-2 4-3 4-4 4-5 4-6 4-7 4-8 4-9 4-10 4-11 4-12 4-13 4-14 4-15 4-16 4-17 4-18 4-19 4-20 4-21

Title Socio-economic classification of respondent households. Distribution of knowledge levels of organic rice responses. Distribution of of kn knowledge le levels of of su sustainable ag agriculture responses. Distribution of knowledge levels of pesticide residues responses. Distribution of knowledge levels of water pollution responses. Respondents’ past experience of purchasing organic rice Distribution of respondents’ responses regarding price as an important factor. Distribution of respondents’ responses willingness to buy if  organic rice is more available. Distribution of respondents’ responses regarding packaging as an important factor. Distribution of respondents’ responses about willingness to  buy if organic rice is not yet certified. Distribution o f re respondents’ r es esponses a bo bout f ar armers m us ust engage in sustainable agricultural practices. Distribution of respondents’ belief that chemicals in agriculture have negative effects in the environment. Distribution of of re respondents ac according to to ri rice co consumption  per day. Distribution of of re respondents ac according to to th the pr price of of ri r ic e regularly consumed. Distribution of willingness to pay responses. Reasons why consumers buy organic rice. Reasons why consumers do not buy organic rice. Logistic Re Regression Estimates fo for th the MI MIDDLE In Income Class Willingness to Pay Model. Logistic Regression Estimates for the HIGH Income Class’ Willingness to Pay Model. Logistic Regression Estimates for the OVERALL Willingness to Pay Model. Models’ Performance.

Page 29 31 32 32 33 34 34 35 35 36 36 37 37 39 40 41 42 43 44 46 47

LIST OF FIGURES

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Figures 3-1 4-1. 4-2 4-3 4-4 4-5 4-6 4-7 4-8 4-9

Title

Page Questionnaire Structure 24 Distribution of respondents according to age. 26 Distribution of respondents according to gender. 27 Distribution of respondents according to civil status. 27 Distribution of respondents according to educational at attainment. 28 Distribution of respondents according to years of education. 28 Distribution of respondents according to household size. 29 Awareness regarding organic rice. 31 Distribution of respondents according to the price of rice 38 regularly consumed. Distribution of of res resp pondents ac according to to wi willingness to to pa pay fo for  39 organic rice.

LIST OF APPENDICES

Appendix 1 2

Title Survey Questionnaire Raw Data for Analysis

Page 57 60

Chapter I INTRODUCTION

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A. Background

All over the world, consumers consumers have increasing increasing concerns about their health as well as the environmen environment’s t’s health. They are now worried worried about the the presence of the negative consequences of chemical residues on their health and on the environment in convention conventional al production production methods. methods. Because Because of this, markets for “green” “green” and ecofriendly products are rapidly increasing (Canavari and Olson, 2007). One “green” “green” and eco-frien eco-friendly dly product product is organi organicc food. food. Organi Organicc food food is a  product  product of organic agriculture agriculture or organic organic farming. Organic Organic agriculture agriculture includes all agricultural systems that dramatically reduce the use of chemo-synthetic fertilizers and pesticides pesticides and instead instead allow local soil fertility and natural capacity of plants and animals to increase both agricultural yields and disease resistance (IFOAM, 2003). One of these organic products products is organic rice. This is the major major organic product of the Philippines that are sold locally mainly because rice ranks as the most important cerea cereall in the the Phil Philip ippi pine nes. s. Howe Howeve ver, r, acco accord rdin ing g to Alfo Alfon n and and Redo Redoña ña (200 (2005) 5) of  Philippine Rice Research Institute Central Experiment, Philippine organic rice is yet to be labeled as “organic” because the functional definition for the product is not clear. This may be because because the National Standard Standard on Organic Rice Productio Production n and Processing (NSORPP) is still under consultation; therefore, the production systems and quality quality definitions definitions for “organic “organic rice” vary from one group to another. But now, the Organic Certification Center of the Philippines (OCCP), an independent, private, membership-based, organic-standard setting and organic certification body already exist to certify farms that are fully adopting organic rice farming (PCARRD, 2006). For Mr. Rafael Demafeliz (2008), Rice Program Coordinator of City Agriculturist’s Office (CAO) of General Santos City, organic rice is a product of a production method that has not used any pesticide nor has it used any synthetic or chemical fertili fertilizer zer in any of its growth growth phase. phase. This This will be the definit definition ion that will be used throughout the paper. The market for organic product is growing with an annual average growth rate of 20-25%, not only in Europe and North America but also in many other countries, including the Philippines (IFOAM, 2003). In the Philippines, organic agricultural  production was launched in 1986 and since then the area of production has been increa increasin sing g dramat dramatical ically ly (Ara, (Ara, 2003). 2003). Philip Philippin pinee organi organicc agricu agricultu lture re is still still in its emerge emergent nt or incipi incipient ent phase phase (IFOAM (IFOAM,, 2003; 2003; FIBL, FIBL, 2006), 2006), and the produc productio tion n is 9

steadily growing between 10-20% 10-20% annually (FAS/USDA, 2000). The area devoted to organic rice production is about 0.35% of the total land area allocated for rice in the Philip Philippin pines es (Alfon (Alfonaa and Redońa Redońa,, 2005). 2005). Accord According ing to PhilD PhilDHRR HRRA A (2004) (2004),, as of  2001, Magsasaka At Siyentipiko Para Sa Pag-Unlad Ng Agrikultura (MASIPAG) data shows that there are 1,897 1,897 farmers (with 1,754 hectares) who are fully adopting adopting organic rice farming, and 11,052 farmers (with 15,411 hectares) adopting the lowchemical and pesticide practice (MASIPAG, 2001). According to Roddy et al. (1994) as cited in Gil et al. (2001), the low demand for organic rice in the Philippines can be explained by problems related to consumer   product acceptability, such as new product and deficiencies in distribution channels. On the other hand, there were studies which found out that the low supply of organic food such as organic rice resulted from high costs, especially labor costs, and the difficulty of shifting from conventional to organic farming (Vetter and Christensen, 1996 and Hamiti et al., 1996 as cited in Gil et al., 2001). In General Santos City, one of the cities in the Philippines, it was estimated that almost 10% of the total area devoted for rice is already allocated for organic rice  production (Demafeliz, 2008). However, the CAO of General Santos City had not yet done any studies regarding the demand for organic rice that may provide General Santos farmers a guarantee that their organic rice will be patronized by the consumers.

General Santos City General Santos City (GenSan) is situated in the southern part of the country, in the province of  South Cotabato. Cotabato . The city has a population of 535,747 as of 2007, making it as one of the most populous cities in the Philippines. General Santos City lies at the southern part of the Philippines. It is located at 6°7'N 125°10'E. GenSan is strategically strategically located within the trading and economic center of SOCSKSARGEN SOCSKSARGEN Growth Growth Area (South (South Cotaba Cotabato, to, Sultan Sultan Kudarat Kudarat,, Sarang Sarangani ani and General General Santos Santos). ). Fertile agricultural lands at 17,489 hectares are 32.63% of the city's total land area (Official Website of General Santos City, 2008). Some municipalities in Region XII are already into organic rice farming. The municipalities of Norala, Surallah, and Sto. Nińo in the province of South Cotabato as well well as the municip municipalit alities ies of Isulan Isulan and Bagumb Bagumbaya ayan n in the province province of Sultan Sultan Kudarat are the key places where Organic Rice farming is practiced. In an interview 10

with Mr. Rafael C. Demafeliz and Ms. Merlinda M. Donasco of the CAO of General Santos City, 10% of the rice farmers in General Santos City, having more or less 15 hectares, hectares, already practice organic organic rice farming. According According to Eddie Panes, Panes, chairman chairman of the Association of Sustainable Agriculture Practitioners of Palimbang (ASAPP), a  big bulk of their organic rice are sold in General Santos City, which is the nearest key urban center from the various towns and municipalities with a travel time of more than three hours (The Organic Store, 2007). In General Santos City’s major malls, KCC Mall of GenSan and Gaisano Mall, organic rice is already being sold.

B. Statement of the Problem

In the the Phil Philip ippi pine nes, s, orga organi nicc rice rice farmi farming ng is a grow growin ing g sect sector or whic which h is encouraged by the government and many private initiatives. The General Santos City Agriculturist Office advocates the practice of organic farming. There are several  programs and activities that supplement its advocacy. With this, the production of  organic farming is expected to increase but is there also a market for organic rice? Are the consumers of General Santos willing to pay a price premium for organic rice? The increase in the number of organic or “safer” foods indicates that there is a  potential market. But then, consumers consumers know very little about the production process. This might be true for the urban areas in the Philippines and in General Santos City as well and therefore lead to a low level of confidence in organic production. This implies that there is not enough information on the consumers’ side regarding organic agriculture or production. Thus, this study is relevant to explore consumers’ level of  awareness regarding organic rice farming. Another issue or problem related to this study is that it is difficult to encourage rice farmers to adopt organic farming method because of the fact that conventional farming is easier done with the easily available commercial fertilizers and pesticides. According to Ms. Juliet Marazil G. Ballo (2008) of Technical Assistance Center for  the Development of Rural and Urban Poor (TACDRUP), almost 8 out of 10 rice farmers do not religiously follow the trainings TACDRUP TACDRUP gave them. Other factors such such as lack lack of govern governmen mentt suppor support, t, lack of consum consumer er awarene awareness ss on benefi benefits ts of  organic rice, lack of market information, high certification costs and high costs of  inputs prevent rice farmers to apply organic rice farming (Rodriguez et al., 2007). Price premium exists for organic rice because of the low supply of organic rice from few rice farmers. Rice farmers do not engage in organic rice farming due to high 11

costs, costs, especi especiall ally y labor labor costs, costs, and the difficu difficulty lty of shifti shifting ng from from conven conventio tional nal to organic farming (Vetter and Christensen, 1996 and Hamiti et al., 1996 as cited in Gil et al., 2001). 2001). Shifting Shifting from conventio conventional nal to organic farming farming entails entails high costs of    productio production n at the initial stages. However, However, in the long run, costs of producti production on in organic organic farming will already already involve lower lower costs of production. production. According According to Ms. Ballo (2008) of TACDRUP, the potential lower costs of production will provide the farmers better better income. income. With this, price price premium exist exist in order for the farmers to be highly highly encoura encouraged ged to practi practice ce organi organicc farming farming..

And also, also, price price premium premium exists exists

 because of the “safe” feature added to organic rice. With this, according according to Ms. Ballo (2008), there is a need for a price premium premium in organic rice being sold in the market in order for the rice farmers to be assured that they can gain profit out of producing organic rice, thus, serves as an incentive to them. As of the middle of 2008, there was no existing study that determined the consumers’ willingness to pay for organic rice in General Santos City. Thus, this study aimed to address the following questions: 1. What is is the level of consum consumer er awareness awareness regarding regarding organi organicc rice? 2. What are consumers’ consumers’ reason reasonss for buying buying or not not buying buying organic organic rice? rice? 3. How much much addition additional al percentage percentage of the price price of convent conventional ional rice rice will the the consumers be willing to pay for organic rice? 4. What What are are the the facto factors rs that influe influenc ncee the the will willin ingn gnes esss to pay (WTP) (WTP) for  for  organic rice for various levels and for all respondents in general? 5. What What are the similarit similarities ies and differe difference ncess of factors factors that affect affect WTP for  organic rice among income classes?

C. Objectives of the study

The main objective of this study is to derive willingness to pay estimates for  organic rice in General Santos City. Specifically, the study aims to accomplish the following goals: 1. To identify identify the the level level of consumer consumer awareness awareness regardin regarding g organic organic rice, rice, 2. To determine determine consum consumers’ ers’ reasons reasons for for buying buying and not not buying buying organic organic rice, rice, 3. To dete determ rmin inee the the leve levell of pric pricee prem premiu ium m that that Gene Genera rall Sant Santos os City City consumers are willing to pay for organic rice, 4. To analy analyze ze the factor factorss that that can influe influenc ncee the the WTP WTP for for orga organi nicc rice rice for  various income levels and for all respondents, and 12

5. To assess assess and and compare compare the the factors factors that can can affect affect the WTP WTP for organi organicc rice among income classes.

D. Significance of the the Study Study

People from both developed and developing countries prefer organic over  convention conventional al rice, owing to the innumerable innumerable health benefits benefits of organic rice. Organic Organic rice has a far greater quality, as compared to conventional one (Anuradha, 2001). Thus, this study attempted to assess what consumers prioritize in terms of purchasing rice – conventional rice or organic rice with higher price. The focus of most studies on agricultural products has been in the production side of these commodities, including the technology and processes involved. This kind of production philosophy in agricultural products has revealed many possible improvements to the agribusiness cycle but has given inadequate attention to the demand side (Concepcion, 2005). This study focused on consumers’ willingness to  pay for organic rice in General Santos City, the demand side of the agribusiness of  organic organic rice. The results results of this study can contribute contribute for the possible possible success of the rice industry, particularly organic rice. The number of studies regarding consumer surveys on organic products in developing countries is very limited, unlike in developed developed countries. Thus, this study serves as a pilot study on the willingness to pay for organic rice of consumers in General Santos City. Among the valuation or willingness to pay studies done by UP Mindanao students, this research is the first to use binary logistic regression as a tool for  analys analysis; is; future future research researchers ers may evalua evaluate te the streng strengths ths and weaknes weaknesses ses of this this instru instrumen ment. t.

This This study study also also contrib contribute utess to the valuat valuation ion or willin willingne gness ss to pay

literature. Consumer awareness for organic rice was improved during the data collection  period of the study by sharing to the respondents the benefits of organic rice and organic rice farming after the interview. With this, consumers may better evaluate their buying behavior for rice. In addition, the findings of this study can serve as inputs for the local government of General Santos City and the provincial government of South South Cotaba Cotabato to on formul formulati ating ng polici policies es and programs programs for the welfare welfare of both both organic rice farmers and consumers alike.

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E. Scope and Limitations

This study dealt with the consumers’ willingness to pay for organic rice in Genera Generall Santo Santoss City City.. It focuse focused d on determini determining ng the price premium premium consum consumers ers were willing willing to pay for organic rice and the analysis analysis of factors influencing influencing the willingness willingness to pay of consumers for organic rice. The factors that were used for the analysis were limi limited ted to demo demogr grap aphi hicc facto factors rs,, attit attitud udin inal al fact factor orss and and the the leve levell of aware awarene ness ss regarding regarding the concept concept of organic organic rice, sustainable sustainable agriculture, agriculture, pesticide residues and water pollution. General Santos City was the general area since it is the nearest key urban center from the various towns and municipalities of South Cotabato that produce organic organic rice. Specifically, Specifically, Brgy. Lagao (1st and 3rd) and Brgy. San Isidro (Lagao 2 nd) were the areas for the study since the total population of these barangays comprises 16.42 % of General Santos City in 2007 (NSCB, 2008). These areas also likely covered all income classes. The barangays’ land use classifications are residential, socialized housing, commercial, institutional parks, and recreation (City Planning, 2007). Moreover, the population of these barangays has access to the supermarkets where organic rice is mostly marketed. As much as the researcher wanted to cover  larger area, time and budget constraints were hindrances to include a larger sample size.

F. Definition of Terms

1.  Barangay  – the basic political unit in the Philippines. It is the smallest administrative division in the Philippines (Barangaynetwork, (Bara ngaynetwork, 2008). 2. Continge Contingent nt Valuatio Valuation n Method Method (CVM) (CVM) – refers as a “stated preference” meth method od,, becau because se it asks asks peop people le to dire direct ctly ly stat statee thei theirr valu values es (USD (USDA A –   NRCSNOAA, 2000). 3. Conventional rice  – a product of a farming system that uses any amount of  synthetic fertilizers, pesticides, and growth regulators (IFOAM, 2003). 4. Organic Farming  – refers to a farming system which uses organic manure, and avoids or largely excludes the use of synthetic fertilizers, pesticides and chemicals (FAO, 1998 as cited in Gil et al., 2001). 5. Organic rice – a product of production method that has not used any   pesticide nor has it used any synthetic or chemical fertilizer in any of its growth phase (Demafeliz, 2008). 14

6.  Price Premium – the additional percentage charged for organic products such such as organi organicc rice when when compar compared ed with with conven conventio tional nal produc products’ ts’ prices prices (Rodriquez et al., 2001). 7. Willingness to Pay (WTP) – the sum of money representing the difference   betwee between n consum consumers ers´´ surplu surpluss before before and after after adding adding or improv improving ing a food food  product attribute (Gil et al., 2001). 8. Conventional farmin ing g syst system em that that uses uses any any amou amount nt of  Conventional Farming    – a farm synthetic fertilizers, pesticides, and growth regulators (IFOAM, 2003).

15

Chapter II REVIEW OF LITERATURE

A. Motives for for Buying Organic Organic Products Products

Consum Consumers ers have become become distance distanced d from from the origin origin of their their food food and the context context of food production production which is less transparen transparentt today. This influences influences how consumers perceive their food and can be seen as part of the great demand for locally and organically produced foods. foods. Organic consumers are regarded to distinguish their  roles in the food system. system. Buying Buying organic can be seen as a way of dealing with the comple complex, x, modern modern food food syste system m and its perceiv perceived ed risks risks becaus becausee certifi certified ed organi organicc  products  products are controlled controlled and bear information information about their production production (Torjusen (Torjusen et al., 2001 as cited in Schobesberger, Schobesberger, 2006). But for Pedersen (2003) the the perception of the choice of organic products as a risk-reducing strategy explains only a part of the decision process and the demand for organic food. He calls for a broader view on this subject subject and names the search for trustworth trustworthy y exchange exchange partners, the wish to support local producers or to make a political statement as some of further factors included in the purchase decision. There is no single motive for buying organic, often there are several reasons working together. Worry about one's one's health and quality aspects are often often mentioned as reaso reasons ns for for star starti ting ng to cons consum umee orga organi nicc prod produc ucts ts..

Cons Consum umers ers freq freque uent ntly ly

 purchasing organic products show concerns for many parts of the food system which are related to health in a wide context (Torjusen ( Torjusen et al., 2001 as cited in Schobesberger, 2006). These include how the food was produced, processed and handled and how thes thesee step stepss affec affected ted peop people le,, anim animals als and and natu nature. re. When When peop people le inte intens nsif ify y thei their  r  consum consumpti ption on of organi organic, c, altrui altruisti sticc motive motivess like like suppo supporti rting ng organi organicc farmin farming g or   protecting the environment become more important. According to a study by Sanders and Richter (2003), income level and the  presence of children influence the motives motives and the buying buying decision. Consumers with high income have a wide range of motives for purchasing organic food and their  reasons reasons are more hedonistic hedonistic and altruistic. altruistic. For medium medium and lower income income classes animal welfare and health are the main concerns. Households with children also have a wider wider range range of motive motives, s, where where enviro environme nment nt and animal animal welfare welfare are the main reasons. In contrary to other studies, responsibility for the family and the health of  16

children are only minor arguments for buying organic in Switzerland (Sanders and Richter, 2003). In the United States, consumers mentioned health and nutrition before taste and the environment as reasons why they purchased organic food (Hartman Group, 2000 2000 cited cited in Dimitr Dimitrii and Greene, Greene, 2002). 2002).

Consum Consumers ers value organic organic product productss as

healthy, healthy, environmen environmentally tally friendly, friendly, more tasty, and nutritious than convention conventional al ones (Saba and Messina, 2003).

B. Estimation of of Willingness to Pay (WTP) (WTP)

According to Gil and Sanchez (2001), consumers seek food safety and are willing to pay higher prices for “healthy products” since they obtain greater utility level and at the same time reducing health risks. However, these consumers are unable to determine food safety before purchase, although this is considered as the most important constraint to economic efficiency in the production and marketing of  food food safety safety..

A method method commonl commonly y applie applied d to determin determinee food food safety safety benefit benefitss is

estimating consumers´ willingness to pay for safer and better quality food. (Goldberg & Rosen, 2005). 2005). Along these lines, the notion of  willingness willingness to pay could be defined as the sum of money representing representing the difference difference between consumers´ consumers´ surplus before and after adding or improving a food product attribute. Van Ravenswaay & Wohl (1995) and Halbrendt et al. (1995) as cited in Gil and Sanchez (2001) introduced models that estimate consumers’ willingness to pay when adding or enhancing a given quality quality attribute. attribute. Such models models lie on Lancaster approach (1966), which sustains that consumers directly derive utility from goods´ attributes. When When measur measuring ing willin willingne gness ss to pay (WTP), (WTP), some some method methodolo ologie giess apply apply   prim primary ary data data direc directl tly y deri derive ved d from from cons consum umer ers. s. Thes Thesee meth method odss are cont contin inge gent nt valuation, conjoint analysis and experimental auctions. Hedonic prices is the most well-known method, which used indirect sources to infer consumers´ willingness to  pay. While the methodologies in the first group lie on consumers´ elicited preferences, hedonic prices is based on consumers´ revealed preferences (Lee & Hatcher, 2001 as cited in Gil and Sanchez 2001).

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C. Contingent Valuation (CV)

The origins of contingent valuation (CV) are the estimation of non-market goods1, but it is now widely used to evaluate willingness to pay for new products such as organic products. The contingent valuation method (CVM) involves directly asking  people, in a survey, how much they would be willing to pay for a specific good or  service. service. It is called “contingent” “contingent” valuation valuation because because people are asked to state their  willingness to pay, contingent  on a specific specific hypotheti hypothetical cal scenario scenario and description description of  the service or good (USDA – NRCSNOAA, 2000). The contingent valuation method is referred to as a “stated preference” method because it asks people to directly state their their valu values es rathe ratherr than than infer inferri ring ng valu values es from from actu actual al choi choices ces,, as the the “rev “reveal ealed ed  preference” methods do. The fact that CV is based on what people say say they would do, as opposed to what people are observed to do, is the source of its greatest strengths and its greatest weaknesses. The CVM creates a hypothetical market situation for a given good or service. It tends to quantify the value consumers confer to products by associating that value with the sum of money they are willing to pay (Kawagoe & Fukunaga, 2001 as cited in Gil and Sanchez, 2001). 2001). Studies Studies conducted conducted through CVM offer a specific survey survey design design,, especi especially ally when when they they inquir inquiree about about WTP. WTP. They They solici solicitt inform informati ation on about about consumptio consumption n behavior, behavior, risks perceptions perceptions and experiences, experiences, and socio-demo socio-demograph graphic ic info inform rmat atio ion n (Mit (Mitch chel elll & Cars Carson on,, 1989 1989;; Cars Carson on,, 1999 1999). ). Resp Respon onde dent ntss face face a hypothetical purchasing situation in which they have to answer how much money they are willing to pay for a given product, or if they are willing to pay a certain premium, expressed either as a sum of money or as a percentage above the reference price (Carmona-Torres & Calatrava-Requena, 2006). Although the CV approach is more commonly used to measure consumer    prefe preferen rences ces for non-ma non-marke rkett (e.g., (e.g., enviro environme nmenta ntal) l) goods goods,, its applic applicatio ation n in WTP studies studies for organic organic foods is useful useful and appropriate appropriate for three reasons. First, First, CVM has emerged as a useful research method to study factors that influence food demand (e.g., (e.g., van Ravens Ravenswaa waay y 1995; 1995; Lee and Hatche Hatcherr 2001; 2001; Lourei Loureiro, ro, McClus McCluskey key,, and Mittelhammer Mittelhammer,, 2002). 2002). They also provide provide rich conceptual frameworks frameworks for integrating integrating  product attributes into economic and marketing analyses. Second, the CV method can  potentially capture the true value that consumers place on reducing disease risks 1

Economic goods from all kinds of ecosystem and environmental services (USDA – NRCSNOAA, 2000).

18

associated with consuming certain types of foods. Finally, CV can be employed as an alternative to concept testing to forecast the market potential for new product concepts (Mitchell and Carson, 1989).

D. Elicitation Techniques

According to Portney (1994), elicitation techniques are applied using CVM to draw out the value value of a good or service. service. The elicitation elicitation technique techniquess used in any CV studies are of different types. Elicitation techniques are essential components of any studies using CVM. CVM. The different elicitation techniques are discussed discussed below.

1. Bidding Game Approach In this approach, respondents will be randomly assigned a particular bid from a range of predetermined bids. bids. The bid that will be assigned may either be a lower or  higher level bid. The respondents would then be asked to answer ‘yes’ or ‘no’ to that  particular bid, and the procedure would continue until ‘the highest positive response is recorded (Randall et al, 1974 as cited in Venkatachalam, 2004). This approach offers relatively better results since it gives a ‘market-like’ situation to the respondents in which they could could research their preferences. preferences. Another Another advantage advantage of this approach approach is that the researcher could obtain maximum willingness to pay value.

2. Payment Card Approach Through this approach, the respondents will choose their maximum WTP value out of of the range of WTP values values for the good in question question.. The researcher researcher or  interv interviewe iewerr will will provid providee the respon responden dents ts with with anothe anotherr benchm benchmark ark versio version n of the  payment card that contains consumers’ average WTP amount for other goods. goods. Using this approach, there would be a chance that the WTP values will be possibly affected  by ranges of biases (Mitchell and Carson, 1984).

3. Open-ended Elicitation Method This This techni technique que involv involves es asking asking the respon responden dents ts for their their maximu maximum m WTP amount for a public good or policy policy with no value being suggested to them. them. Using this approach does not require an interviewer and does not result in any starting point bias (Walsh (Walsh et al., 1984 as cited cited in Venkat Venkatach achalam alam,, 2004). 2004).

Thus, Thus, this approac approach h is

convenient to answer. This approach may create large number of non responses since 19

respondents either find it difficult to answer or do not have incentive to provide true answ answer. er.

Moreo Moreove ver, r, the the open open-e -end nded ed ques questi tion onss may may draw draw stra strate tegi gicc bias bias and and

respondents may answer the cost rather than true value.

4. Dichotomous Choice Method This format provides respondents with only two choices (i.e., "Yes" or "No" to a post posted ed pric price) e) to respo respond nden ents ts.. This This appr approa oach ch resem resembl bles es actua actuall mark market et choi choice ce   beh behav avio ior. r. Inde Indeed ed,, this this prop proper erty ty moti motiva vate ted d the the Nati Nation onal al Ocean Oceanic ic Atmo Atmosp sphe heric ric Admini Administr strati ation on (NOAA) (NOAA) panel panel to strong strongly ly recomme recommend nd the DC format format when when they they convened in 1993 to evaluate the pros and cons of various CV survey question formats (NOAA 1993). However, lesser information can be gained in this type of  technique compared to others (Moon et al., 2003).

E. Binary Logistic Regression

Modeling the relationship between explanatory (independent) and response (dependent) variables is a fundamental activity encountered encountered in statistics. To examine the relationship between a single explanatory variable and a single response variable, simple linear regression is commonly used. used. On the other hand, when there there are several explanatory explanatory variables, variables, multiple multiple regression regression is used (Cook et.al., 2000). 2000). However, However, not all depend dependent ent variab variables les are numeri numerical cal values values.. Instead Instead,, the respon response se is simply simply a designation of one of two possible outcomes (a dichotomous or binary response) (UNT, 2009). Binary Logistic regression had been popular to address dependent variable that is binary in nature like success success or failure or a yes or no response (Wuensch, 2008). It can can be used used to pred predic ictt a depe depend nden entt vari variab able le on the the basi basiss of cont contin inuo uous us and/ and/or  or  categorical independents and to determine the percent of variance in the dependent vari variab able le expl explai aine ned d by the the inde indepe pend nden ents ts;; to rank rank the the rela relati tive ve impo import rtan ance ce of  independents; to assess interaction effects; and to understand the impact of covariate control control variables. variables. The impact of predictor predictor variables variables is usually explained explained in terms of  odds ratios (Garson, 2008). Logistic regression applies maximum likelihood estimation after transforming the dependent into a logit variable (the natural log of the odds of the dependent occurring or not). In this way, logistic regression estimates the odds of a certain event

20

occurring. Note that logistic regression calculates changes in the log odds of the dependent, not changes in the dependent itself as OLS regression does (USF, 2009). When OLS regression is used for a dichotomous dependent, the assumptions of normality and homoscedasticity as a normal distribution is impossible with only two values are violated. violated. For a dependent dependent variable which assumes assumes values of zero (0) and one (1), the commonly used regression model will still allow estimates below zero (0) and above one (1). The multiple linear regression does not handle non-linear  relat relatio ions nshi hips ps,, where whereas as loglog-li line near ar meth method odss do. do. Thes Thesee obje object ctio ions ns to the the use use of  regression with dichotomous dependents apply to polytomous dependents also which is the multiple logistic regression (Garson, 2008).

F. Related studies on WTP

Several studies have examined consumer willingness to pay a premium for  organi organicc produc products ts and have have invest investiga igated ted underl underlyin ying g consum consumers ers’’ motiva motivatio tions ns for   purchasing organic foods. Many of these studies utilized CVM to examine the level of   price premium consumers are willing to pay for organic products and the socioeconomic and demographic factors that affect consumers’ willingness to pay. But there there are also also stud studies ies that that have have not not empl employ oyed ed CVM CVM in esti estima mati ting ng cons consum umers ers’’ willingness to pay for a price premium for organic products. The willingness to pay of different consumer segments in Spain for organic  products was estimated by by Gil, Garcia, and Sanchez (2001). Specifically, the organic  products that were considered in their study were vegetables, potatoes, cereals, fruits, eggs, chicken, chicken, and red meat. Since the organic organic market in Spain was still too “thin” “thin” and organic products were not available in all retail outlets, the CVM was chosen for  the study’s methodology. methodology. The data used in the study came from a survey conducted in July through through August August 1997 in the Spanish Spanish regions regions of Navarra and Madrid. Madrid. Four  hundred respondents, who were main purchasers of food products within each of their  hous househ ehol olds ds,, were were rando randoml mly y sele select cted ed from from a cens census us data data and and were were pers person onal ally ly interv interviewe iewed d at home home in each regio region. n.

Result Resultss revealed revealed that that only only organi organicc food

consumers showed willingness willingness to pay a premium. Among the wide range of products products considered, consumers were willing to pay a higher premium for meat, fruits, and vegetables; it can be implied that more importance is given by consumers in fresh and  perishable products. The results also showed that regional regional differences were identified when it was observed that consumers were willing to pay a higher premium for  21

organic products in the organic producing region of Navarra than in the consuming region region of Madrid Madrid..

Several Several recomme recommenda ndatio tions ns were given given by the authors authors,, which which

includ includes es increa increasin sing g the consum consumers ers’’ knowled knowledge ge of an organi organicc produc product, t, creatin creating g marketing strategies targeted towards increasing consumption of the organic foods with high WTP premiums, and reducing marketing margins of the organic supply chain to reduce prices at the retail level. Boccaletti Boccaletti and Nardella Nardella (2001) presented the results results and analysis analysis of a survey of Italian consumers consumers’’ WTP for pesticide-free pesticide-free fresh fruit fruit and vegetables. vegetables. The said survey was composed of 336 in-person interviews conducted in January 1998 in three large supermarkets located in Northern Italy. Among the main explanatory variables used used in the empiri empirical cal model, model, income income and indivi individua duall percep perceptio tion n of pestic pesticide ide risk  risk  concern were found to give the most relevant increase in the probability of a positive  premium.  premium. The results results of the study suggested suggested that that Italian consumers consumers were generally concerned about health risks from pesticides, with only 11% of the respondents not willing willing to pay a premium premium for pesticide-free pesticide-free fresh fruits and vegetables vegetables.. But 70% of  the respondents who were willing to pay a premium would only pay a small premium (6 to 10%) above regular retail prices. For the implications, the proponents proponents said that the price premium on the pesticide-free products sold by producers through mass marketing channels should not exceed 10% and that fresh fruits and vegetables should have an easily recognized certification procedure so that consumers would be able to separate regular produce from organic ones. A stud study y cond conduc ucted ted by Cran Cranfi fiel eld d and and Magn Magnus usso son n (200 (2003) 3) dete determ rmin ined ed if  Canadian consumers would pay a premium for Pesticide-Free Production (PFP) food  products.  products. PFP is similar to the organic production production system system because it emphasizes emphasizes on reduced pesticide use in conjunction with increased reliance on producer knowledge of agronomic agronomic practices practices that mitigate weed, insect, insect, and disease disease pressure. The CVM was used in the survey because it addresses the issue of the inability to observe consumers’ actual decisions to purchase and pay a premium for products that are not available in the market place like the PFP ones. The results showed that 67% 67% of the respondents would be willing to pay a modest (i.e., 1 to 10%) premium, while about 5% of the responden respondents ts would be willing willing to pay more more than a 20% premium. premium. With regards to the factors influencing the WTP, the results indicated that consumers are more likely to pay a higher premium if they are younger, are more likely to shop at health food stores to purchase a PFP food product, and are concerned with pesticides 22

in agriculture and food. food. The study recommended that PFP producers should market their products and their production system to processors who supply health food stores. Akgung Akgungor, or, Miran, Miran, and Abay Abay (2007) (2007) estima estimated ted a repres represent entati ative ve sample sample of  Turkish urban consumers’ willingness to pay for reduced chemical residues in food and the trade-off trade-off they make between between cosmetic cosmetic quality quality and food safety. safety. The study study revealed that educated and high-income individuals have increased interest on organic  product purchases. According to the results, the reason for choosing organic organic products was that consumers perceived that organic products have higher nutritional value and carry carry low health health risk. risk. The implica implication tion of the results results was a potent potential ial demand demand for  organic products in Turkey’s urban markets, since consumers were willing to pay a  price premium of 36%. Rodriguez, Lacaze, and Lupin (2007) estimated the consumers’ willingness to   pay for organic organic food products products available available in the Argentinean Argentinean domestic domestic market. The   proponen proponents ts selected the CVM CVM to estimate the WTP. The selected selected products products for the study study were were regula regularr milk, milk, leafy leafy vegeta vegetable bles, s, whole-w whole-whea heatt flour, flour, fresh fresh chicke chicken, n, and aromatic herbs. The results of the the study indicated that organic products are positively positively valued in Argentina, Argentina , since consumers affirm to be willing to pay price premiums to acquire acquire these products. products. According According to the results, results, higher income income level respondents respondents were willing to pay higher prices for organic products: 12.2% more for regular milk, 87% more for leafy vegetables, 7.5% more for whole-wheat flour, 20% more for fresh chicken, chicken, and 110% for aromatic aromatic herbs. The study provided provided useful useful evidence evidence to the govern governmen mentt to gain gain suppor supportt in the promot promotion ion of organi organicc produc productio tion, n, regula regulatio tion n  processes, and labeling programs out of the results of the study. Torres (2003) studied the WTP for the preservation of Mt. Apo Natural Park  which employed employed CVM, which is primarily primarily used for monetary valuation valuation of consumer   preferences for non-market goods. The study determined whether people would place certain value on the existence of an environmental resource, specifically the existence of the Mt. Apo National Park. The data used for estimating the WTP was collected from 600 residents residents of Davao Davao City, Digos Digos City, and Tagum Tagum City. City. The result result of the study showed that the average willingness to pay value derived from the estimation was higher than the presently imposed entrance fee to Mt. Apo. The factors that were found to influence the WTP were age, civil status, and occupation of the consumers.

23

There are several studies which examined the WTP for organic products that did not utilize CVM as a component of their methodologies. These studies can still be of help in molding the methodology part of this study. Rundgren (2000) concluded that the perception of health risks influence the willingness to pay for food. Low prices are less important for organic buyers than for    people people who do not buy organic organic food (Wier and Andersen, Andersen, 2003). 2003). Torjusen Torjusen et al. (2001), as cited in Schobesberger (2006), found similar results in Norway. Their  surv survey ey show showss that that orga organi nicc cons consum umer erss are are less less conc concer erne ned d abou aboutt low low pric prices es,, convenienc conveniencee and wider selections selections of products. products. A survey with a small sample sample size in Mumbai, India showed that about 25% of the consumers were aware of the existence of organic products, 9% also bought organic products mainly for health reasons. A lack lack of knowle knowledge dge and awaren awareness ess was the main main reason reason for not buying buying organic organic (Garib (Garibay ay and Jyoti, Jyoti, 2003). 2003). Anothe Anotherr study study from India India shows shows that around around 71% of  consumers perceived organic vegetables as tastier and healthier, but only 54% of them knew what organic organic production production of vegetables meant (Rundgren (Rundgren,, 2000). A consumer  survey survey among among househ household oldss in Turkey Turkey (Akgün (Akgüngör gör,, 1999 1999 cited cited in Rundgr Rundgren, en, 2000) 2000) showed showed that about about 9% of the households households have heard about organic food. Depending Depending on the kind of product, between 1% and 10% of those surveyed prefer organic   produ products cts..

For 75% of the intervie interviewed wed persons persons nutriti nutritiona onall value value and absence absence of 

residues were important when buying food (Akgüngör, 1999 cited Rundgren, 2000). A study was conducted to determine market potentials and WTP for selected organic vegetables in Kandy, Sri Lanka. Lanka. It is specifically done to identify the market  potentials for organic products and consumer expectations in the area (Piyasiri and Ariyawardan Ariyawardana, a, 2002). 2002).

It also also identi identified fied the factors factors that that influe influence nce the additi additiona onall

will willin ingn gnes esss to pay pay for for orga organi nicc vege vegeta tabl bles es..

Resu Result ltss reveal revealed ed that that most most of the the

consumers are aware of organic products and this awareness had influenced their  cons consum umpt ptio ion n of orga organi nicc prod produc ucts ts in the the past past..

The The majo majorit rity y of the the cons consum umers ers

considered price as an important factor for their organic product consumption and had atta attach ched ed a high higher er impo import rtan ance ce for for cert certifi ifica catio tion n from from a repu reputed ted orga organi niza zati tion on.. Respondents also indicated that organic products should be available in accessible shops for the the convenience of purchasing. purchasing. Results of the the regression analysis revealed that of the socio-demographic factors, income, environmental education and years of  education education significant significantly ly influenced influenced the WTP for organic organic vegetables. vegetables. Based on the study it could be concluded that consumer awareness effectively advances the demand 24

for organic products and there is a great potential to introduce organic products to the supermarket supermarketss in Kandy, Kandy, Sri Lanka. The authors authors recommended recommended to introduce organic organic   pro produ duct cts, s, wide widely ly in supe superm rmark arket ets, s, to have have prop proper er aware awarene ness ss prog program ramss amon among g consumers in promoting the demand for organic products. The study conducted by Ara (2002) employed a choice experiment in order to elicit consumers consumers’’ preferences preferences for various attributes attributes of organic organic rice.

The author’s author’s

respondents are from Manila and Naga. Half of the respondents in Manila were aware of organic organic rice products, while while in Naga it was only 33%. The author author did not expect these results because separate studies by Xavier University (1995) found no one among the 378 respondents being aware of organic rice in the market and the Upland Marketing Foundation (1998) found only 4% in Manila being aware of organic rice  product. In both cities, health risk is a primary concern of the consumers. Other factors (environmental, eating quality, certification of products and trade factor) attributed by the study showed varying priorities between the two cities. Consumers in Manila, livi living ng far far from from the the prod produc ucti tion on site, site, are more more conc concern erned ed with with certi certific ficati ation on – a guarantee that such commodity is indeed organic. Those living near the production site site (Nag (Naga) a),, cons consum umers ers put put more more weig weight ht on farm farm envi enviro ronm nmen ent. t. In both both citie cities, s, consumers’ utility increases when percentage of health risk decreases. The eating quality quality of rice has significant significant attribute attribute among high income income groups groups in Manila. In Manila, respondents showed WTP premium up to 13.6 pesos for 80% reduction of  health risk; thus giving high value to certification system. The higher income groups were willing to pay higher premium value (Ara, 2002). Further investigation was recommended by the author to determine what makes people prefer one certification to another in each city and for each income category. The preceding review presents presents meaningful meaningful information information on the willingness willingness of  consumers to pay a price premium for organic foods and environmental resources. Since similar studies on organic rice in the Philippines and General Santos City have not been done yet, the findings of this study provided additional information on the subject. Thus, this study about WTP for organic rice is timely and relevant.

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Chapter III METHODOLOGY

In this study, consumers’ willingness to pay for organic rice in General Santos City, the methodology is divided in three parts: theoretical framework, empirical framework/data analysis, analysis, and the data collection.

A. Theoretical Framework 

The The law law of dema demand nd is utili utilize zed d the the theo theoret retica icall frame framewo work rk that that help helped ed in drawing the model for analysis in the study.

The Law of Demand  The law of demand states that the quantity of a well-defined good or service that that peop people le are will willin ing g and and able able to purc purcha hase se durin during g a part partic icul ular ar peri period od of time time decreases as the price of that good or service rises and increases as the price falls, everything held constant. Among the determinants of demand are tastes, number of   buyer  buyers, s, prices prices of related related goods, goods, income income,, and expect expectatio ations ns (McConn (McConnell ell and Brue, Brue, 1999). If any of these determinants changes, the demand of that particular product also also change changes. s. The The relatio relationsh nship ip between between income income and the quanti quantity ty demand demanded ed of a  product can be positive or negative one, depending depending on the nature of the product. If the  product is a normal good , the quantity demanded of the product increases as the consumers’ consumers’ income income increases. increases. This implies implies that the quantity quantity demanded of a normal good has a positive relationship with income. But if the product product is an inferior good , the quantity demanded of the product decreases as the consumer’s income increases, hence implying that it has a negative relationship with income. On the other hand, the  price of related goods is also a critical factor that affects the demand of a certain good. The relationship between the price of related goods and the quantity demanded of a good good can also be positi positive ve or negati negative. ve. The positi positive ve relations relationship hip would would occur occur in

 substitutes , wherein the quantity demanded of the product in concern increases as the   price price of the substi substitut tutee good good increas increases. es. The The negati negative ve relatio relationsh nship ip would would occur occur in

complements , wherein the quantity demanded of the product in concern decreases as the price of the complementary good increases because both products tend to be used together (Pindyck, 2001).

26

In this study, various factors that may possibly affect the willingness to pay for  orga organi nicc rice rice were were pred predete eterm rmin ined ed..

The The facto factors rs that that were were cons consid ider ered ed were were the the

attitudinal factors (i.e. towards price, packaging), awareness factors (towards organic rice rice,,

sust sustai aina nabl blee

agri agricu cult ltur ure, e, pest pestic icid idee

resi residu dues es,,

and and

wate waterr

poll pollut utio ion) n),,

and and

demographic factors (age in years, gender, household income, number of years of  education, and household household size). Hence, the theoretical demand model that was used in the study was in the form, WTP = ƒ (attitudinal factors, awareness levels, demographic factors) This theoretical model presents the basic economic concept of WTP being a function of various factors.

B. Empirical Framework/Data Framework/Data Analysis

The CV approach was chosen for this study in view of the fact that CV is more com commonl monly y

used sed

to

meas easure ure

con consume sumerr

prefe refere ren nces ces

for for

non-m on-mar arke kett

(e.g (e.g., .,

environmental) goods. CV is still applicable since organic rice is not usually available in the markets of General Santos City. This study utilized the dichotomous method wherein the researcher asked the respondents whether they were willing to pay a price   premium for organic rice or not. It could be assumed that the respondents’ answers answers were based on the organic and convention conventional al prices they find when choosing choosing organic rice over the conventional rice. The dichotomous method used in asking respondents’ willingness to pay for  organic rice only obtained two answers (yes or no) and served as the dependent variable. The explanatory variables were combination combination of categorical and continuous variables. Binary logistic regression using using the stepwise method was utilized to obtain the factors that affect the willingness to pay for organic rice in terms of attitudinal vari variab able les, s, awar awaren enes esss leve levels ls,, and and demo demogr grap aphi hicc featu features res.. The The Bina Binary ry Logi Logist stic ic Regression Model was in the form: WTP = β0 + Β1Pu + β 2Av + β3Ce + β4Ag + β5Ch - Β6 Pr + Β7Pa + β8Or + β9Sa + β10Kpr + β11W + β12A + β13G - β14S + β15E + β16 I

27

Where: VARIABLE

WTP

DEPENDENT VARIABLE If the re respondent is willing to pay a pric rice  premium for organic rice

MEASUREMENT 1 = yes, 0 = no

EXPLANATORY VARIABLES

Pu Av Ce Ag

Ch

Pr Pa

Or

Attitudinal variables If respondent or members of the household  purchased organic rice If respondent wo would be willing to buy organic rice if they were more available If the respondent would be willing to buy organic rice even if it is not yet certified

If the respondent agrees that farmers should engage in sustainable agricultural production  practices If the respondent believes that the use of   synthetic chemical in agriculture has negative effect on the environment If the respondent considers price as an important factor in purchasing rice If the re respondent considers packaging as an important factor in purchasing rice Awareness variables Respondent’s knowledge about organic rice

Sa

Respondent’s kn knowledge ab about su sustainable agriculture

Kp r

Respondent’s knowledge about pesticide residues

W

Respondent’s knowledge about water    pollution

1 = yes, 0 = no 1 = yes, 0 = no 1 = yes, 0 = no 1 = yes, 0 = no

1 = yes, 0 = no

1 = yes, 0 = no 1 = yes, 0 = no

0 = never heard 1 = know word 2 = know well 0 = never heard 1 = know word 2 = know well 0 = never heard 1 = know word 2 = know well 0 = never heard 1 = know word 2 = know well

Demographic variables

A

Ag e

G

Gender

S

Household size

Continuous variable (in years) 1 = female 0 = male Continuous variable

E I

Years of schooling Monthly household income

Continuous variable Continuous variable

28

The binary logistic logistic regression regression model was estimated by maximum maximum likelihood likelihood.. In order to compare what explanatory variables each income class give importance and in order to determine the impact of these significant explanatory variables on the willingness to pay dependent variable, a binary logistic regression model for each income class was derived. The The foll follow owin ing g subsub-se secti ction onss disc discus usss the the test testss and and param paramete eters rs that that were were evaluated in the binary logistic regression models:

1. Significance tests for binary logistic regression a. Hosmer and Lemeshow chi-square test of goodness of fit This is the recommended test for overall fit of a logistic regression model and is also called the chi-square test. It is considered more robust than the traditional chi-square test, particularly if continuous covariates are in the model or sample size is small (Garson, 2009). A non-significant chisquare indicates that the data fit the model well (Wuensch, 2008).  b. -2LL statistic likelihood ratio This This is also also called called goodne goodness ss of fit, fit, devian deviance ce chi-sq chi-squar uare, e, scaled scaled deviance, deviation chi-square, DM, or L-square. It reflects the significance of the unexplained variance in the dependent variable. This statistic is found in the "-2 Log Likelihood" column of the model summary table of  the output (Garson, (Garson, 2009). 2009). This statistic statistic measures measures how poorly the model   predi predicts cts the decisi decisions ons - the smaller smaller the statis statistic tic the better better the model model (Wuench, 2008). The likelihood ratio is not used directly in significance testing, but it is the basis for the likelihood ratio test, which is the test of  the difference between two likelihood ratios (two -2LL's) (Garson, 2009).

2. Measures of Effect Size a. Nagelkerke's R 2 This is a modification of the Cox and Snell coefficient to assure that it can vary from 0 to 1. That is, Nagelkerke's R 2 divides Cox and Snell's R 2 by its maximum in order to achieve a measure that ranges from 0 to 1 (Garson, 2009). This can reach a maximum of 1 (Wuench, 2008). 2008). 3. Parameter Estimates Interpretation a. Odds ratio 29

The impact of predictor variables is usually explained in terms of  odds ratios. It represents the factor by which which the odds (event) change for a one-unit change in the independent variable (Garson, 2009).  b.

Parameter estimates

These are the b coefficients used to predict the log odds (logit) of  the dependent dependent variable. variable. Parameter Parameter estimates (b coefficients coefficients)) associated associated with explanatory variables are estimators of the change in the logit caused  by a unit change in the independent variables (Wuench, 2008). Also, these are simply parameter estimates which correspond to b coefficients in OLS regression (Garson, 2009).

C. Data Collection

The areas of the study were the Brgy. Lagao (1 st and 3rd) and Brgy. San Isidro (Lagao 2nd). The interviews were conducted from 20 October to 22 November 2008. Quota sampling method through through known groups was utilized in this study. The three income classes (high, middle, middle, low) were the known groups. Forty respondents respondents were interviewed for each income class. The number of respondents for all income classes was the same. With this, the study had a total of 120 respondents, which was more than the minimum number of samples (100) needed for a representative sample in descriptive studies (Sample and a nd Sampling Technique, 2005). Purposive sampling method was used since all households of different income classes were widely scattered in the area. Moreover, this study targeted equal number  of respondents for each income class. Thus, random sampling techniques were not applied. Pretes Pretestin ting g of the questi questionn onnaire aire was done on 22-23 22-23 Augus Augustt 2008 2008 in Brgy. Brgy. Dadiangas East. This was conducted conducted in order to determine type of primary data that will be used for the study and if the potential respondents would likely understand each question. Five questionnaires were given to the respondents, who were allowed to answer answer the questi questionn onnaire aire on their their own and five respon responden dents ts were person personall ally y interviewed. It was found out out that potential respondents would would likely understand each question well and that personal interview was more effective than the other one. Thus, Thus, primar primary y data data using using person personal al interv interview iew was utilized. utilized. Accordi According ng to the US Depart Departmen mentt of Agricu Agricultu lture re Natura Naturall Resour Resource ce Conser Conservat vation ion Servic Servicee and Nation National al Oceano Oceanogra graphi phicc and Atmosp Atmospher heric ic Admini Administr stratio ation n (USDA-N (USDA-NCRC CRCSNO SNOAA, AA, 2000), 2000), 30

 personal interviews are generally the most effective for complex questions, because it is often often easier easier to explai explain n the requir required ed backgr backgroun ound d inform informati ation on to respon responden dents ts in   pers person on,, and and peop people le are more more like likely ly to comp complet letee a long long surv survey ey when when they they are interviewed in person. Figure 1 shows shows the general sequence of the interview. The respondents were first asked about their knowledge on organic rice, sustainable agriculture, pesticide residues and water pollution. The respondents daily household consumption of rice and the usual price of the conventional rice bought were asked.

Figure 1. Questionnaire Structure

The researcher asked the respondents if they experienced buying organic rice. If the respondents already purchased organic rice before, they were asked for their  reasons for buying organic rice. On the other hand, if the respondent had not yet  purchased organic rice, he/she was asked about the reasons for not buying organic rice. Using Using the dichot dichotomo omous us method method,, the respon responden dents ts were were asked asked if they they were were willing to pay additional amount for organic rice. If the respondent was not willing to 31

 pay, the researcher asked the next questions. If the respondents were willing to pay additional amount for organic rice, using the payment card method, the interviewer  asked the respondent to choose from the different ranges of percentage. After asking the respondents’ willingness to pay for organic rice, they were asked for some attitudinal factors. The respondent were asked if they believe or agree that farmers should engage in sustainable agricultural production practices and if they  believed that the use of synthetic chemicals in agriculture has negative effects on the enviro environme nment. nt. They They were were also also asked asked if price, price, packag packaging ing,, and certifi certificati cation on were important factors in purchasing rice and if they were willing to buy organic rice if  these were more available. Other factors that consumers consider in purchasing and not purchasing organic rice that were not mentioned in the questionnaire were also noted. noted. The interv interview iew was conclu concluded ded after after asking asking the respon responden dents ts demogr demograph aphic ic features.

32

Chapter IV RESULTS AND DISCUSSION

This This sect sectio ion n is divi divide ded d in four four part parts: s: soci socioo-de demo mogr grap aphi hicc prof profil ilee of  respondents, awareness levels, attitudinal characteristics and the willingness to pay models.

A Socio-demographic profile of respondents

1. Age Figure 2 shows shows the distribution of respondents according to age. Seventeen of  the household respondents respondents (14.17%) were 60 years years old and above. On the other hand, 12 respondents respondents (14.17% (14.17%)) were 55 to 59 years old. Twenty Twenty respondents respondents (16.67%) (16.67%) were aged 50 to 54 years old while 11 household respondents (9.17%) were between 45 to 49 years old. Fourteen respondents (11.67%) (11.67%) were 35 to 39 years old and 40 to 44 years old. Eleven responden respondents ts (9.17%) (9.17%) were between 30 to 34 years old and 15 respondents (15%) were 25-29 years old. old. Only 2.5% of the respondents respondents were 18 to 24 years old.

Figure 2. Distribution of respondents according to age.

    n     e     u     q     e     r      F

25 20 15 10 5 0

20

18 11

14

14

11

17 12

3

  v   2 4  -  2  9  -  3 4  -  3  9  - 4 4  - 4  9  -  5 4  -  5  9    b o    1  8   2  5   3  0   3  5  4  0  4  5   5  0   5  5   &  a   6  0 Age range range

33

2. Gender  As shown in Figure 3 below, majority of the respondents (60%) were female. This is because the study intended to target the household member who made the  purchasing decision.

Figure 3. Distribution of respondents according to gender.

40% 60% male female

3. Civil Status Figure 4 shows the distribution of respondents respondents according to civil status. Most of the respondents (83%) were married. This can be attributed to the household sizes of the respondents. respondents. Sixteen Sixteen respondents respondents (13%) were single single and only 5 respondents respondents (4%) were widower.

Figure 4. Distribution of respondents according to civil status. 120

99

100     n 80     e     u     q 60     e     r 40      F 20

16 5

0 single

married

widowed

Civil status

34

4. Educational attainment and years of schooling Most of the respondents (80%) reached post high school level education as show shown n in Figu Figure re 5. Some Some of the the respo respond nden ents ts (5.8 (5.83% 3%)) also also had had post post-g -gra radu duat atee education. Sixteen respondents (13.33%) reached high school level education and eight respondents (6.67%) only attained elementary level education

Figure 5. Distribution of respondents according to educational attainment. 120 12 0

96

100 10 0

  y   c 80   n   e   u 60   q   e   r 40    F

20

8

16

0 grade rade scho school ol leve levell hig high school school leve levell post hig high school school level

Educa tional tional a ttainme ttainme

The distribution of respondents according to years of schooling shown in Figure 6 is related to the distribution distribution of respondent respondentss according according to educationa educationall attainment attainment shown in Figure 5. Majority of the respondents had 14 years years of schooling since most of them fini finish shed ed their their coll colleg egee leve level. l.

The The respo respond nden ents ts who who had had more more than than 14 years years of 

schooling were those those who proceeded with a post graduate degree. Respondents who had less than eight years of schooling were those who reached grade school level.

35

Figure 6. Distribution of respondents according to years of education. 17-20

4

  g   n 13-16    i    l   o   o    h   c   s 9-12    f   o   s   r   a   e 4-8    Y

85

23

6

1-4

2

0

15

30

45

60

75

90

Frequency

5. Household Size In this study, household refers to the number of persons who is sleeping in the dwelling unit and has common arrangements for the preparation and consumption of  food. As shown in Figure Figure 7 below, most of the respondents had had five to six members. The average household size of the respondents was 5.23.

Figure 7. Distribution of respondents according to household size. 70

59

60 50      y      c      n      e      q      e      r        F

40

33

30

17

20

8

10

3

0

1-3

4-6

7 -9

10-1 2

13-15

Household size

6. Socio-economic class Table 1 shows the socio-economic classification of the r espondent households. In this study, household income refers to the accumulated monthly income of the 36

earning household members, income from farms (if any), and the monthly pension received by any retired household members.

Table 1. Socio-economic classification of respondent households. Income Group AB C1 Broad C D E Total

Frequency 40 15 25 17 23 120

Percent 33.33 12.50 20.83 14.17 19.17 100.00

According to the AC Nielsen (as cited in Concepcion, 2005), AB Households in Mindanao are characterized as those households earning PhP50, 000.00 per month or above, residing in subdivisions with concrete structure and complete utilities. They frequently frequently occupy top positions positions in companies companies or owner of their own businesses. businesses. AB category is also called the high income income class. Households under under C1 category can also  be called as upper middle class. They earn PhP30,000.00 to PhP49,999.00 per month, usually live in subdivisions with homes having a mixture of concrete and wooden materia materials. ls. The heads heads of househ household oldss are usually usually middle middle manage managemen mentt and junior  junior  exec execut utiv ives es.. Broa Broad d C or the the lowe lowerr midd middle le inco income me clas classs hous househ ehol olds ds earn earnin ing g PhP15,000.00 to PhP29,000.00 PhP29,000.00 per month, residing in generally less expensive houses with basic amenities. Household heads in Broad C usually have occupations like office workers, government employees and rank and file. Households under the D class category have an income of PhP8,000.00 to PhP14,999.00 per month, living in houses located in the less expensive part of the city which are made of a mixture of  cement cement and recycled recycled materials materials,, smaller smaller in size. size. Member Memberss of the househ household old have occupations such as blue-collar jobs, tricycle drivers, factory workers and the like. The E households are those who hardly have enough, earning irregularly. These households have a monthly income of PhP8000.00 or less and their jobs are typically not regular or earns too little. Households under this category are also below the  poverty threshold of PhP5000.00 per month. Since this study aimed to compare the responses for each income group, high, middle and low income classes have have the same number of respondents. respondents. In this study, AB class is the high income class, C1 and Broad C categories comprise the middle 37

class, class, and D and E categor categories ies are classifi classified ed as the low income income class. class. Of all the respondents, 40 respondents (33.33%) are under the AB category, C1 category had 15 respondents (12.5%), Broad C category had 25 respondents (20.83%), D category had 17 respondents (14.17%), and E category had 23 r espondents (19.17%).

B. Awareness Levels

During the personal interviews, the respondents were asked regarding their  level of awareness about organic rice, and the concepts of sustainable agriculture,  pesticide residues and water pollution. pollution. In this study, study, the ‘never heard’ response response of a respondent respondent meant meant that the respondent respondent never had any idea of the word concept. concept. The ‘kno ‘know w word word’’ answ answer er mean meantt that that the the resp respon onde dent ntss had had at leas leastt hear heard d of the the word word/c /con oncep ceptt or that that the the resp respon onde dent nt had had elic elicit ited ed diff differe erent nt desc descri ript ptio ion n of the the word/c word/conc oncept ept..

On the other other hand, the ‘know well’ well’ respon response se indicated indicated that the

respondent respondentss not only heard of the word/concept word/concept but also can fully describe describe or define define the word/concept.

1. Awareness regarding organic rice As shown in Figure 8 in the next page, 27 respondents (64%) have at least heard of the word organic organic rice. This result result can be related to the study done done by Ara (2003) which indicated that almost half of the respondents in Manila had heard the word organic rice while it was 33% in Naga and another study showed that none of  their 378 respondents respondents was aware of organic rice (Xavier University, University, 1995 as cited in Ara, 2003). 2003). It can be said that the result may be an outcome outcome of the rapid growth growth of  organic agriculture in the Philippines.

Figure 8. Awareness regarding organic rice.

38

36% yes no 64%

On the average, it can be observed that high income class had the highest frequency of respondents having heard of organic rice (70%), followed by the middle income class (65%), and low income class (57.5%) as shown in Table 2. Among the respondents who had heard of organic rice, it was the high income class respondents who knew well the word organic rice (12) compared to the lower income classes (6).

Table 2. Knowledge levels of respondents about about organic rice. Knowledge about organic rice

Never heard

ALL

n 43

L OW

% 35.83

n 17

MIDDLE

% 42.5

n 14

HIGH

% 35

n 12

% 30

Know word

52

43.33

17

42.5

19

47.5

16

40

Know well

25

20.83

6

15.0

7

17.5

12

30

Total

120

100

40

100

40

100

40

100

2. Knowledge regarding sustainable agriculture Tabl Tablee 3 show showss the the dist distri ribu buti tion on of resp respon onse sess rega regard rdin ing g know knowle ledg dgee on sustainable agriculture. Thirty-four respondents (28.33%) never heard of the word sustainabl sustainablee agriculture agriculture while the rest have heard of the word sustainab sustainable le agriculture. agriculture. Fifty-nine respondents (49.17%) knew the word and 27 (22.5%) know the word well. On the average, most of the high income class respondents knew the word (50% knew the word and 32.5% know well the word) compared to the lower income classes.

Table 3. Knowledge level of respondents about sustainable agriculture. 39

Knowledge regarding sustainable agriculture

Never heard

ALL

n

LOW

%

34

n

28.33

MIDDLE

%

15

37.5

n 12

HIGH

% 30

n 7

% 17.5

Know word

59

49.17

19

47.5

20

50

20

50.0

Know well

27

22.50

6

15.0

8

20

13

32.5

120

100

40

100

40

100

40

100

Total

3. Knowledge about pesticide residues Eighty-eight percent of the respondents knew the word and knew well the word pesticide residues while 22% never heard the word pesticide residues, as can be seen in Table 4. Taking into account the proportion of those those who knew the word well, the results indicated that high income had the greater proportion (37.5%) in contrast with low and middle income classes which both had 27.5% proportion.

Table 4. Knowledge levels of respondents about pesticide residues. Knowledge about pesticide residues

Never heard Know word Know well Total

ALL

n

%

LOW n %

MIDDLE n %

12

30. 0

10

25. 0

4

10.0

17

42. 5

19

47. 5

21

52.5

11

27. 5

15

37.5

40

100

40

100

26

21.6 7

57

47.5 0

37

30.8 3

11

27. 5

120

100

40

100

HIGH n %

4. Knowledge regarding water pollution Table 5 next page shows the responses on knowledge levels about water   pollution  pollution.. Fifty-three Fifty-three respondents respondents knew knew the word water pollution pollution (44.17%) (44.17%) and 52 respondents knew well the word water pollution pollution (43.33%). On the other hand, hand, fifteen respondents (12.5%) (12.5%) never heard of the word water pollution. It can be observed that that the middle and high income classes have the same percentage (10%) that never heard of the word water pollution pollution.. Seven responden respondents ts (17.5%) (17.5%) of the low income class never heard of the word water pollution. 40

Table 5. Knowledge levels of respondents about water pollution. Knowledge regarding water pollution

Never heard Know word Know well Total

AL L

LOW

n

%

15

12.5 0

53

44.1 7

MIDDLE

n

%

7

17. 5

19

47. 5

52

43.3 3

120

100

HIGH

n

%

n

%

4

10. 0

4

10.0

19

47. 5

15

37.5

14

35. 0

17

42. 5

21

52.5

40

100

40

100

40

100

With With the findin findings gs regard regarding ing the knowle knowledge dge about about sustain sustainabl ablee agricu agricultu lture, re,  pesticide residues and water pollution, it can be said that out of all the respondents, 34 respondents (28.33%) never heard of the word sustainable agriculture, 26 respondents (21.17%) never heard of pesticide residues and 15 respondents (2.55%) never heard of  water pollution. pollution. The results showed showed that, among the three concepts, concepts, water pollution pollution was the most familiar concept for them because this concept, even not related to orga organi nicc rice rice farmi farming ng,, is the the one one that that is usua usuall lly y incl includ uded ed in the the news news,, seen seen in televisions or newspapers in the Philippines as compared to the other concepts.

C. Attitudinal Characteristics Characteristics

1. Past experience of purchasing organic rice Of all the respondents, only 27 of the respondents (22.5%) had experienced   purchasing organic rice and 93 (77.5%) never experienced buying organic rice as shown shown in Table 6. Majority Majority of those who had experienced experienced consumin consuming g organic rice were from the high income class with 15 respondents (37.5%) compared to the lower  income classes with 6 respondents (15%) in each class. This result can be due due to the abil abilit ity y of the the cons consum umers ers to pay pay the the pric pricee prem premiu ium m of orga organi nicc rice. rice.

Weal We alth thie ier  r 

consumers are likely to afford the price premium of organic rice which can be associated why high income class respondents were the ones who had experienced  buying organic rice.

41

Table 6. Respondents’ past experience of purchasing organic rice Experienced purchasing of  organic rice

ALL

Yes

LOW

HIGH

n

%

n

%

n

%

n

%

27

22.5

6

15

6

15

15

37.5

No Total

MIDDLE

93 120

100

77.5 40

34 100

85 40

34 100

85 40

25

62.5

100

2. Importance attached to price As shown in Table 7, among the respondents, 95.83% of them believed that  price is an important important factor in purchasing rice. Only one respondent respondent (2.5%) from the low and high income class and three respondents (7.5%) from middle income class revealed that price was not an important factor in purchasing purchasing rice. This result shows shows that consumers were price sensitive sensitive in terms of buying buying rice. These results are also the the same with the findings of other studies such as of Piyasiri and Ariyawardana (2002) and Rodriquez et.al (2007). These studies indicated that majority of their respondents consider price as a relevant factor in purchasing organic products.

Table 7. Distribution of respondents according to the importance attached to price in  purchasing decisions. Price is an ALL L OW MIDDLE HIGH important factor n % n % n % N % Yes

115 No

Total

95.8 3 5

120

100

39 4.17 40

97.5 1 100

37 2.5 40

92.5 3 100

39 7.5 40

97.5 1

2 .5

100

Those who regarded that price is not an important factor in purchasing rice mentioned mentioned that physical appearance appearance or quality quality of the rice is more important for them than the price price of the rice. They argued argued that their basis basis in buying buying rice is not just the

42

 price but also the physical physical appearance of it. They would purchase purchase rice if the physical appearance of it is good and not because of the cheapness of its price.

43

3. Willingness to buy if organic rice is more available

One hundred-two hundred-two respondents respondents (85%) indicated that they are willing to buy if  organic rice is more available in the market as shown shown in Table 8. These respondents revealed that they are willing to purchase purchase at least once. Only four respondents respondents (10%) of the low income class, 10 respondents (25%) of the middle income class, and four  (10%) of the high income class said that they are not willing to buy if organic rice is more available.

Table 8. Distribution of respondents according willingness to buy if organic rice is more available. Willing to buy if  ALL LOW MIDDLE HIGH organic rice is n % n % n % n % more available Yes

102

85

No Total

36 18

120

100

90 15

40

30 4

100

75 10

40

36 10

100

90 25

40

4 100

4. Importance attached to packaging As shown shown in Table Table 9, among among the respon responden dents, ts, 74 respond respondent entss (61.67 (61.67%) %) revealed revealed that packaging packaging was an important important factor in purchasing purchasing organic organic rice. These respondents indicated this answer because they thought that packaging was a way for  them to make sure that the rice is really an organic one or not. Those 46 respondents (38.33%) who considered packaging as unimportant factor indicated that packaging is not a required required feature for organic rice since it only provides an additional additional cost to the  product  product that would would lead to higher cost cost of organic rice. It can be observed observed that there were only few differences of answers among the three income classes. These findings cont contra radi dict cted ed the the resu result ltss foun found d by Piya Piyasi siri ri and and Ariy Ariyaw awar arda dana na (200 (2002) 2).. Thei Their  r  respondents consider packaging as an unnecessary feature for organic products.

44

10

Table 9. Distribution of respondents’ according to the importance attached to  packaging in purchasing decisions. Packaging is ALL LOW MIDDLE HIGH an important n % n % n % n % factor Yes

74

61.67

No Total

46 120

100

25

62.5

38.33 40

25

62. 5

37. 37.5 515

15 100

40

100

24

60

16

40

40

100

5. Importance attached to certification SixtySixty-six six respon responden dents ts (55%) (55%) reveal revealed ed that that they they were were not willin willing g to buy organic rice if it is not yet certified as shown in Table Table 10. They said so because they want to assure that the organic rice that they may purchase has good quality and if it is really an organic one. The remaining 54 respondents (45%) considered that having a certification is too costly for the producers and will provide an additional cost that will lead to higher price of organic rice. These These results conform conform with the findings findings of  Ara (2003) and Piyasiri Piyasiri and Ariyawardana Ariyawardana (2002). The former study study indicated that respondents’ utility increases if certification is available on the product and the latter  study indicated indicated that greater greater percentage percentage of their respondents respondents who were willing willing to buy organic products from supermarkets pointed out that at least a local institute should certify organic products to assure the quality of products.

Table 10. Distribution of respondents’ according to willingness to buy even if organic rice is not yet certified. Willing to buy if organic rice ALL LOW MIDDLE HIGH is not yet certified n % n % n % n % Yes

54 No

Total

45 66

120

100

20 55 40

50 20 100

21 50 40

52.5 19 100

13 47.5 40

32.5 27 100

45

67.5

6. Respondents’ perception about the involvement involvement of farmers in sustainable sustainable agricultural practices Sustainable agricultural practices, in this study, refer to the practices which adopt

the goal of ensuring the productive future of agriculture, the environment and the economy of rural communities. As shown in Table 11, m ajority of the respondents (95.83%) believed that farmers should engage in sustainable agricultural practices and only five respondents (4.17%) did not believe that farmers should engage in agricultural  practices.

Table Table 11. Distri Distribut bution ion of respon responden dents’ ts’ accordi according ng to percep perceptio tion n on the farmers farmers’’ involvement in sustainable agricultural practices. Agree that farmers must engage in AL L LOW MIDDLE HIGH sustainable agricultural n % n % n % n % practices Yes

115

95.83

No Total

39 5

120

100

40

97.5

37

4.17

1

100

92.5 2 .5

40

39

97.5

3

100

7.5 40

1

2.5

100

7. Respondents’ belief that chemicals in agriculture have negative effects in the the environment. One hundred-one respondents (92.5%) believed that chemicals in agriculture have negative negative effects in the environment environment while only nine respondent respondentss (7.5%) (7.5%) did not believe believe that chemicals chemicals in agriculture agriculture have negative negative effects effects in the environment environment (Table (Table 12). The results results show show that that respon responden dents ts gener generall ally y believ believed ed that that chemic chemicals als are harmfu harmfull for the environment.

Table Table 12. Distri Distribut bution ion of respon responden dents’ ts’ belief belief that that chemic chemicals als in agricu agricultu lture re have have negative effects in the environment. believes that chemicals in ALL LOW MIDDLE HIGH agriculture have negative effects in n % n % n % n % the environment Yes

111 No

92. 5

92. 5

37 9

7.5

36

90 3

38 7.5

95 4

10 46

2

Total

120

100

40

100

40

100

40

100

8. Regular consumption of rice As shown in Table 13, majority of the respondents (41.67%) consumed rice at an average of two kilograms kilograms per day. On the other hand, hand, 31 respondents respondents (25.83%) (25.83%) consumed 1 kilogram kilogram of rice per day. day. Fourteen respondents (11.67%) consumed rice at 1.5 kilograms per day, while 11 respondents (9.17%) consumed 3 kilograms per  day. Seven responden respondents ts (5.83%) consumed consumed rice of less than one kilogram kilogram per day. Only two respondents respondents (1.67%) consumed consumed rice of more than 3 kilograms kilograms per day. It is known that regular consumption of rice of households depends on their respective household sizes.

Table 13. Distribution of respondents according to daily rice consumption. Daily rice consumption (kg) 50% premium

LOW

MIDDLE

%

n

%

HIGH

n

%

n

n

%

52

43.33

26

65.0

16

40.0

10

25.0

9

7.50

2

5.0

5

12.5

2

5.0

7

5.83

4

10.0

2

5.0

1

2.5

9

7.50

2

5.0

3

7.5

4

10.0

5

4.17

0

0.0

2

5.0

3

7.5

9

7.50

1

2.5

6

15.0

2

5.0

29

24.17

5

12.5

6

15.0

18

45.0

11. Reasons for buying organic rice The 27 respon responden dents ts who experie experience nced d purcha purchasin sing g organi organicc rice rice were asked asked regarding their reasons why they purchased organic rice. Different aspects influenced their purchasing purchasing behavior. behavior. As shown shown in Table 16, the most important important reason reason why these respondents (81.48% of the 27 respondents who already bought organic rice)  bought organic rice was that the belief that organic rice is good for their health.

50

Table 16. Distribution of respondents according to reasons for purchasing organic rice. Reason

n

%

They are good for my health

22

81.48

They do not contain pesticide or have lower residues

10

37.04

They are good for the environment

9

33.33

They have better taste

6

22.22

I just wanted to try them/try something new

3

11.11

It is trendy/fashionable to buy organic rice

2

7.41

 Note: Respondents have multiple responses; n = 27 respondents who had experienced purchasing organic rice.

Ten respondents (37.04%) indicated that the belief in absence of pesticides or  lower content of residues was one of their reasons why they bought organic rice. Anot Anothe herr esse essent ntia iall aspe aspect ct was was the the beli belief ef that that orga organi nicc farmi farming ng was was good good for for the the envi enviro ronm nmen entt (33. (33.33 33%) %) and and that that orga organi nicc rice rice had had good good taste taste (22. (22.22 22%) %)..

Three Three

respondents (11.11%) bought organic rice because they wanted to try it and check its quality quality or they wanted to try something something new. Few respondents respondents (7.41%) (7.41%) purchased purchased organic rice because they thought organic rice is trendy to buy. 12. Reasons for not buying Organic Rice The 93 respondents (77.5% of all the respondents) who did not try to buy organic rice were asked for their reasons why they never tried buying organic rice. The main reason why the respondents (37.63%) never bought organic rice was that they did not know what organic means or because they did not have idea regarding organic organic (Table 17). Another Another important important reason was that, according according to respondent respondents, s, organic rice was either too difficult to find (26.88%) or was too expensive (22.58%). Some respondents (15.05%) did not trust the organic labels thought that organic rice did not have anything anything special special that was worth a higher higher price. Other reasons reasons for not  purchasing organic rice not not included in the the questionnaire were also identified. identified. Seven respon responden dents ts (7.53% (7.53%)) mentio mentioned ned that that organi organicc rice was not availa available ble in the public public markets, one respondent (1.08%) cited that it was not commercially available and another respondent stated that only sinandomeng rice 2 was consumed by their family.

2

A variety of rice called “laon” meaning “baak” a term called as old rice (Benito, 2009).

51

Table 17. Distribution of respondents according to reasons for not buy organic rice. Reasons

I do not know what organic means They are too difficult to find They are too expensive I do not think it is really organic I don’t think there is anything special about them which justifies a higher price Others - not available in Public Market - only sinandomeng variety is consumed - it is not commercially available

n

%

35 25 21 14

37.63 26.88 22.58 15.05 10

7 1 1

10.75

7.53 1.08 1.08

 Note: Respondents have multiple responses; n = 93 respondents who never experienced purchasing organic rice.

D. Willingness to Pay Models

The parameter estimates for each selected product were obtained by applying a Binomial Multiple Logistic Regression. Table 18 to 20 below shows the estimated models taking into account all the respon responden dents ts of the study study as a whole whole and the differe different nt socio-e socio-econ conomi omicc classes classes.. Willingness to Pay Model for the Low Income Class was not shown since there were no variab variable le was statis statistica tically lly signif significan icant. t. Thus, Thus, the models models presen presented ted show show the estimated parameters only for middle and high income classes and for the overall respondents.

1. MIDDLE Income Class’ Willingness to Pay Model In the Table 18 below, only two explanatory variables were found to have impacts on the willingness to pay for organic rice by the MIDDLE Income Class respondents – one attitudinal variable (Available, Av) and one socio-demographic variable (Age, A).

52

Table 18. Logistic regression estimates for the MIDDLE Income Class WTP Model.

Variable

Parameter  estimate (B)

Std Error

Wald Stastic

p-value

(Odds ratio) Exp(B) 10.847

Av

2.384

1.018

5.480

0.019**

A

-0.068

0.036

3.424

0.064*

0.935

-20.054

16096.298

0.000

0.999

0.000

Constant

 N = 40 (33.33% of the total respondents)  Notes: **5%, *10% significance levels

The regression equation generated was in the form: WTPM = -20.054 + 2.384 Buy – 0.068 A Where: WTPM

= Willingness to pay for organic rice among middle income class respondents

Av

= Resp espondent’s willingness to buy organi anic rice if it was more available

A

= Age of the household decision-maker  

The regression model indicates that the willingness to pay for organic rice among the MIDDLE income respondents is mainly explained by the availability of  organic organic rice (Available) (Available) since Buy had the highest odds ratio value value of 10.847. 10.847. This resu result lt conf confor orms ms to the the resul resultt foun found d by Rodr Rodrig igue uezz et al. al. (200 (2007) 7) in whic which h the the AVAILABLE explanatory variable was the one greatly affecting their willingness to  pay for organic rice since respondents purchase organic rice if organic rice were more avai availa labl ble. e. The The odds odds ratio ratio indi indicat cates es that that hold holdin ing g all all othe otherr varia variabl bles es cons consta tant nt,, a MIDDLE income class consumer willing to buy organic rice if it is more available is do so compared to a MIDDLE income class consumer who is not willing to buy even if organic rice is more available The age of the MIDDLE income class’ respondents contribute to a lesser  extent to willingness to pay for organic rice. The 0.935 odds ratio for age indicates that the odds of the willingness to pay for organic rice are more than cut by 0.935 for  every increase in the age of a MIDDLE Income Class consumer. Inverting this odds ratio, for every one year increase in the age of a MIDDLE Income Class consumer, 53

there is a 0.935 increase in the odds that consumer would not be willing to pay for  organic rice.

2. HIGH Income Class’ Willingness to Pay Model It can be seen in Table 19 that availability of organic rice (Av), respondent’s knowle knowledge dge about about pestici pesticide de residu residuee (Kpr) (Kpr) and househ household old size size (S) had statis statistic tically ally significant impact on the willingness to pay for organic rice among HIGH Income Class.

Table 19. Logistic regression estimates for the HIGH Income Class’ WTP Model. Variable

Parameter  estimate (B)

Std Error

Wald Stastic

p-value

(Odds ratio) Exp(B)

Av

5.674

2.547

4.963

0.026**

291.108

Kp r

5.512

2.252

5.990

0.014**

247.536

S

1.109

0.580

3.652

0.056*

3.032

-15.537

6.832

5.172

0.023*

0.000

Constant

 N = 40 (33.33% of the total respondents)  Notes: **5%, *10% significance levels

The regression equation generated was in the form: WTPH = -15.537 + 5.674 Buy + 5.512 Kpr + 1.109 S Where: WTPH

= Willingness to pay for organic rice among high income class respondents

Av

= Respondent’s willingness ess to buy orga rganic rice if it were more available

Kpr

= Respondent’s knowledge abo about pesticide res residu idues

S

= Household Size

54

HIGH income class responden respondents ts asserted their willingness willingness to pay for organic organic rice mainly due to their willingness to buy organic rice if these were more available (Available) which is the same with the result generated from the MIDDLE Income Class respondents. The odds ratio indicates indicates that a high income income class consumer who is willing to buy organic rice if it is more available is 291.108 more likely to do so than a HIGH income class consumer who is not willing to buy even if organic rice is more available. The second highest explanatory variable that influenced the HIGH income class class willin willingne gness ss to pay for organi organicc rice was the respond respondent ent’s ’s knowle knowledge dge about about  pesticide residues (awareness variable Kpr). HIGH income class consumer who had more knowledge regarding pesticide residues in rice were 247.536 times more likely to be willing to pay for organic rice than those HIGH income consumer who had lesser or no knowledge about pesticide residues. Household Household size variable, variable, the only demographic demographic variable that was statistically statistically significant has an odds ratio of 3.032. 3.032. This implies that the odds of the willingness to  pay for organic rice of a HIGH income class consumer is increased for every three additional additional persons persons in the household household size. Inverting Inverting this odds ration, ration, for additional additional  person  person in the household household size of a HIGH income income class consumer, consumer, there will be a 3.02 increase in the odds that the consumer would be willing to pay for organic rice.

3. OVERALL Willingness to Pay Model Four explanatory variables were found to have statistically significant impact on the willingness to pay for the OVERALL respondents - two attitudinal varia bles (if  respondent or members of the household purchased organic rice and availability of  organic rice), one awareness variable (respondent’s knowledge regarding pesticide residues) and one demographic variable (monthly household household income). The details are  presented in the table below. Table 20. Logistic regression estimates for the OVERALL WTP Model. Variable

(Parameter  estimate) B Standard Er Error Wald St Stastic

Pu

1.811

0.722

6.294

Av

2.352

0.737

10.175

Kpr

0.638

0.317

4.039

p-value

(Odds ratio) Exp(B)

0.012**

6.119

0.001*** 0.044**

10.502 1.892 55

Variable I Constant

(Parameter  estimate) B Standard Er Error Wald St Stastic 0.397

0.149

7.076

-4.001

0.955

17.549

p-value

(Odds ratio) Exp(B)

0.008***

1.488

0.000

0.018

 N = 120 (100% of the respondents)  Notes: ***1%, **5%, significance levels

56

The regression equation is shown below: WTPT = -4.001+ 1.811 Purchased + 2.352 Buy + 0.638 Kpr + 0.397 I Where: WTPT

= Willingness to pay for organic rice among all the respondents

Pu

= If respondent or members of the household  purchased organic rice

Av

= Re Respondent’s wo would be be wi willing to to bu buy or organic ri rice if  they were more available

Kpr

= Res Respo pond nden ent’ t’ss kn knowled wledg ge ab about out pes pesti tici cide de resi resid dues ues

I

= Monthly household income

For the OVERALL Willingness to Pay Model, Av was still the explanatory variable with the most significant impact on the willingness to pay for organic rice. Its odd ratio value of 10.502 among indicates that a consumer who was willing to buy organic rice if it was more available was 10.502 more likely to be willing to pay for  organic rice than a consumer who is not willing to buy organic rice. The The seco second nd most most impo import rtan antt expl explan anat ator ory y vari variab able le that that infl influe uenc nced ed the the OVERALL willingness to pay for organic rice was the Pu variable (if the respondent experienced purchasing organic rice) having the odds ratio value of 6.119. This odds ratio shows that a consumer who had experienced purchasing organic rice before was 6.119 times more willing to pay for organic rice than a consumer who had not tried  purchasing organic rice. The respondent’s knowledge about pesticide residues (Kpr), an awareness variab variable, le, was the third third explan explanato atory ry variab variable le that that had a signif significa icant nt impact impact on the willin willingne gness ss to pay for organic organic rice.

Its odds odds ratio value of 1.892 implie impliess that that

consumers who had more knowledge regarding pesticide residues in rice were 1.892 times more likely to be willing to pay for organic rice than those consumers who had lesser or no knowledge about pesticide residues. The only demographic variable that was found to have statistically significant impact on the willingness to pay for organic rice was the monthly household income. Its odds ratio of 1.488 indicates that consumers who had higher monthly income were 1.488 times more likely likely to pay for organic rice. In this study, the HIGH income class 57

consumers were more willing to pay for organic rice compared to the lower income classes. 4. Models’ performance The Models’ performance is shown in Table Table 21. The Hosmer and Lemeshow Test also known as chi-square test is the recommended test for overall fit of logistic regression model (Garson, 2009). This test can be considered more robust than the traditional traditional chi-square chi-square test. A non-significan non-significantt chi-square chi-square indicates indicates that the variables variables included in the analysis fit the model well. As shown in Table 21, each of the models has a finding of non-significance (MIDDLE – 0.588, HIGH – 0.692, ALL, 0.400) that signifies that the each model adequately fits the data.

Table 21. Performance of the WTP models. Hosmer and Lemeshow test WTP MODEL

-2 Log likelihood

 Nagelkerke’s R 2

Chi-square

p-value

MIDDLE

6.743

0.588

31.018

0.588

HIGH

4.421

0.692

19.806

0.692

OVERALL

6.666

0.400

121.732

0.400

It can be seen from the above table that -2 Log Likelihood statistic for each model model is high. high. The -2 Log Likeliho Likelihood od statis statistic tic measur measures es how how poorly poorly the model model  predicts the decisions, the smaller the statistic the better the model. The WTP model model for HIGH income class with a -2 Log Likelihood statistic of 19.806 can be considered the best model generated.  Nagelkerke’s R 2 can be interpreted like R 2 in a multiple regression. Thus only 58.8% of the variation in the MIDDLE income class respondents’ willingness to pay is explained by the explanatory variables included in the MIDDLE income class’ WTP model. Examining the HIGH income class WTP model, only 69.2% of the variation of HIGH income class respondents’ willingness to pay is explained by the explanatory explanatory variables variables included included in WTP model. On the other hand, only 40% 40% of the variability in the OVERALL respondents’ willingness to pay is explained by the explanatory variables included in the OVERALL Willingness to Pay model.

58

It can be observed that all the models have noteworthy values of 0.588, 0.692, and 0.400 for Nagelkerke’s R 2. These These values may be relatively relatively low but then, having having low R 2 values are typically normal since cross-sectional data was used. Low R 2 values may occur possibly because of the diversity of the units in the sample (Gujarati, 2004). Nagelkerke’s R 2 can reach a maximum value of one.

59

Chapter 5 SUMMARY, CONCLUSIONS AND RECOMMENDATIO RECOMMENDATIONS NS

A. Summary and Conclusions

The main purpose of the study study was to derive the willingness willingness to pay estimates for organic rice in General Santos City using the Contingent Valuation Method. It can  be said that all of the objectives of this research were attained. The study utilized some attitudinal, awareness and demographic factors that may possibly affect the consumers’ willingness to pay for organic rice and subjected these factors factors to a Binary Logistic Logistic Regression Regression Model (stepwise (stepwise method). Attitudinal Attitudinal factors that were considered were the respondents’ attitude towards price, packaging, and certification, respondents’ past experience of purchasing organic rice, willingness to buy if organic rice are more available, respondents’ opinion towards sustainable agricultural agricultural practices of the farmers and impact of synthetic synthetic chemical in agriculture. agriculture. Awareness variables included in the study were respondents’ knowledge regarding organic organic rice, sustainable sustainable agriculture, agriculture, pesticide pesticide residues residues and water pollution. pollution.

The

respondents’ age, gender, household size, number of years of schooling, and monthly household income (based on income class) were the demographic factors used for the analysis. It is concluded that majority of the respondents at least had heard of the word organic rice. This can be an outcome of the rapid growth of organic agriculture in the Philippines. However, only few respondents respondents knew well about organic rice. The Willingness to Pay (WTP) Models for each income class and for the overall sample were derived in order to compare what factors are given importance by each income class and the overall sample in determining determining their willingness willingness to pay for  organic rice. However, LOW Income Income Class WTP was not generated since no factors were found to be significant on the willingness to pay for organic rice. Among the factors considered in the study, the factors that were statistically significant in determining the OVERALL WTP were the respondents’ past purchase of organic rice, the respondents’ willingness to buy if organic rice is more available, the responden respondents’ ts’ awareness awareness regarding regarding pesticide pesticide residues, residues, and monthly monthly househol household d income. income. For the HIGH Income Class’ WTP Model, Model, the factors that were statisticall statistically y significant were the respondents’ willingness to buy if organic rice is more available, the respondents’ awareness regarding pesticide residues, and household size. Finally, 60

for MIDDLE Income Class WTP Model, only the respondents’ willingness to buy if  organic rice is more available and the respondents’ age were statistically significant. For the MIDDLE MIDDLE Income Income Class Class estima estimated ted WTP Model, Model, the respon responden dents’ ts’ willingness willingness to buy if organic organic rice is more available available had the greatest impact. impact. On the other hand, the age of the MIDDLE income class’ respondents contributed to a lesser  extent to willingness to pay pay for organic rice. The younger the the MIDDLE income class consumer is, the more s/he would be likely to willing to pay for organic rice. The HIGH Income Income Class Class respond respondent entss assert assert their their willin willingne gness ss to pay for  organic rice mainly due to their willingness to buy organic rice if it was more available, followed by the respondents’ awareness about pesticide residues, and the respondent’s household household size. HIGH Income Class respondents respondents who are willing to buy organic rice will likely to be the ones willing to pay for organic rice. Respondents who had more knowledge regarding pesticide residues were more likely to be willing to pay for organic organic rice. On the other other hand, the bigger bigger the household household size size of HIGH Income Respondents, the more they are willing to pay for organic rice. The OVERALL WTP Model considered considered respondent respondents’ s’ willingness willingness to buy for  organic rice if it was more available as the main variable in determining willingness to  buy organic rice. This signifies that respondents who are willing to buy organic rice if  it was more available are the ones who are more willing to pay for organic rice. The significance of the second highest explanatory variable (if the respondent experienced  purchasing organic rice) that influenced the OVERALL willingness to pay for organic shows that consumers who experienced purchasing organic rice before were the ones more willing willing to pay for organic organic rice. The respondent respondent’s ’s knowledge knowledge about pesticide pesticide residues, which ranked third that made a great impact on the willingness to pay for  organic rice, implies that consumers who had more knowledge regarding pesticide resi residu dues es in rice rice more more will willin ing g to pay pay for for orga organi nicc rice. rice. The The last last facto factor, r, mont monthl hly y household income, indicates that consumers who have higher monthly income are more likely to be willing to pay for organic rice. For those who had purchased organic rice, the primary reason was the belief  that that orga organi nicc rice rice is good good for for thei theirr heal health th.. The The othe otherr reas reason onss cite cited d were were the the respondents’ belief that organic rice lacks pesticides or has lower content of residues, that organic farming was good for the environment, and that organic rice had good taste. Only few respondents indicated indicated that they purchased organic rice because they

61

 just wanted to try it and check its quality or they wanted to try something new and  because they think organic rice is trendy to buy. For those respondents who had not yet tried purchasing organic rice, the main reasons for not doing so was that they did not know what organic means or because they did not have any idea regarding organic rice. Other reasons were: organic rice was too difficult to find, organic rice was too expensive, respondents distrusted the organic labels in organic rice, respondents thought organic rice did not have anything special which was worth a higher price, and respondent loyalty to particular rice varieties. It is concluded that more than half of the respondents are willing to pay for  organic organic rice with varying price premium premium percentage. percentage. On the average, respondent respondents, s, who were willing to pay a price premium, are willing to pay 31-40% price premium for organic rice. Among those who were not willing to pay, the low income class had the highest highest number number of respondents respondents compared compared to the higher income income classes. When the researcher already shared what organic rice is, more than half of the respondents were already willing to pay for organic rice. With the results, the the study verified that HIGH HIGH Inco Income me Clas Classs resp respon onde dent ntss were were the the ones ones more more will willin ing g to pay pay and and had had high higher  er  willingness to pay for organic rice compared to the lower income classes.

B. Recommendations Recommendations

Based on the descriptive findings of the study, only few respondents knew well about organic rice and there exist some misconceptions regarding organic rice. Thus, only respondents who knew very well about organic rice had assessed the  benefits of organic rice. Clear recognition about organic rice is a pre-requisite in order  for the organic organic rice to break free from its niche product product status. Like other other similar  studies, pull strategies should be applied to promote organic rice market growth. Organic market actors must increase consumer “pull” for the expansion of the organic market. In order to exercise this, the organic organic market actors must must convince themselves that there exists a growing consumer demand for organic rice and that when they exert efforts to increase the supply of organic rice this will improve their competitiveness. Consum Consumer er food food educati education on for the consum consumers ers shoul should d be done done in order order to facilitate the expansion of organic movement. movement. Coordination among the government, non-government organizations organizations and private organizations organizations is a must. must. A long term plan 62

for the organic rice sector is also recommended for the rapid improvement of the status of organic rice. Some LGUs already advocate organic rice farming but but still this can be regarded regarded as useless useless if consumers consumers do not apprehend apprehend the benefits in consuming consuming organic rice. Thus, the LGUs or the government as a whole must thoroughly assure an equal assessment of both supply and demand demand for organic rice. This can be considered as a difficult task but this scheme will indeed provide advantages for the consumers and producers.

 Avenues for Future Researches Researchers Researchers may consider consider this study as a basis for further researches. researches. First, First, the study only involved involved General General Santos City as the research area. This study study can be extended extended to other areas in the Philippines Philippines so as to assess and compare willingness willingness to  pay for organic rice. Secondly, Secondly, there are other methods methods in order to determine the impact of factors factors on the willingness to pay for a certain new product. This may be considered by future researchers so as to evaluate what method can be considered as the best method given that each method has its own strengths and weaknesses. Lastly, it is recommended to conduct a study considering the side of the rice farmers such as their willingness willingness to accept to shift from conventional conventional to organic organic rice farming farming since the study had had not captured captured this aspect for some some constraints. constraints. Better  analysis can be made when both farmers’ and consumers’ willingness to accept and  pay are being studied.

63

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Appendix 1 SURVEY QUESTIONNAIRE

AWARENESS LEVLES 1. Have Have you you heard heard of “organ “organic ic rice rice”? ”? ___ Yes

___ No

2. Your Your know knowledg ledgee abou aboutt organ organic ic rice rice ___ Never Heard ___ Know Word ___ Know Well 3. Your knowledge knowledge regarding regarding sustainabl sustainablee agricu agriculture lture ___ Never Heard ___ Know Word ___ Know Well 4. Your Your knowled knowledge ge abou aboutt pestic pesticide ide resi residue duess ___ Never Heard ___ Know Word ___ Know Well 5. Your Your knowled knowledge ge regar regardin ding g water water pollu pollutio tion n ___ Never Heard ___ Know Word ___ Know Well

REGULAR RICE BUYING INFORMATION 6. Your household’ household’ss average average consumption consumption of rice rice per per day day ____________________  7. Usual Usual price price of of Conve Conventi ntiona onall Rice Rice bough boughtt ____________________ 

ATTITUDINAL FACTOR  8. Have you you or a member member of your your family family ever ever purchased purchased organic organic rice? rice? ___ Yes

___ No

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REASONS FOR NOT BUYING ORGANIC RICE 9. I do not not buy buy org organ anic ic rice rice beca becaus usee ___ I do not know what organic means ___ I don’t think there is anything special about them which justifies a higheKpr   price ___ I do not think it is really organic ___ They are too expensive ___ They are too difficult to get ___ others, specify ________________________ 

REASONS FOR NOT BUYING ORGANIC RICE 10. I buy organic organic rice rice because because ___ They have better taste ___ They are good for my health ___ They do not contain pesticide or have lower residues ___ They are good for the environment ___ I just wanted to try them/try something new ___ It is trendy/fashionable trendy/fashionable to buy buy organic rice ___ others, specify ________________________ 

WILLINGNESS TO PAY 11. Are you willing willing to pay a price premium premium for organic organic rice? ___ Yes

___ No (Proceed to no. 13)

12. By how much much are you willing willing to pay for for organic rice? rice? ___ < 10%  ___ 10 – 20% ___ 21 – 30% ___ 31 – 40% ___ 41 – 50% ___ > 50%

ATTITUDINAL FACTORS 13. Are you willing willing to buy organic organic rice if they are more available? available? ___ Yes

___ No

14. Will you buy organic organic rice even even if it is not yet certified? certified? ___ Yes

___ No

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15. Do you agree that that farmer farmerss should should engage engage in sustai sustainab nable le agricu agricultu ltural ral produc productio tion n  practices? ___ Yes

___ No

16. Do you believe that the use of synthetic synthetic chemicals in agriculture agriculture has negative negative effect on the environment? ___ Yes

___ No

17. Is price an important important factor factor in purchasing purchasing rice? rice? ___ Yes

___ No

18. Is packaging packaging of rice rice important important to you? ___ Yes

___ No

SOCIO-ECONOMIC AND DEMOGRAPHIC FACTORS

 Name: ____________________________________ _______________________________________  ___  Sex: ___ Male

___ Female

Civil Status:  ___ Single  ___ Married  ___ Widow(er) Age: _______________  Household Size: _______  Educational Attainment  ___ Elementary  ___ High School  ___ College  Number of years of schooling: _________  Occupation: ____________________ ________________________  ____   No. of working household members: ________  Monthly household income:  ___ more than P50,000 per month  ___ 30,000 to 49,999 per month  ___ 15,000 to 29,999 per month  ___ 8,000 to 14,999 per month

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