April 15, 1999
DAR-LBP JOINT MEMORANDUM CIRCULAR NO. 07-99
TO : All Concerned Officials and Personnel of the DAR And LBP
SUBJECT : Revised Valuation Guidelines For Rubber Plantations
I. PREFATORY STATEMENT
The rubber plantation income models presented under the old rubber Land Valuation Guideline (LVG No. 6, Series of 1990) recognized the income of rubber plantations based on processed crumb rubber. However, recent consultations with rubber authorities (industry, research, etc.) disclosed that the standard income approach to valuation should measure the net income or productivity of the land based on the farm produce (in their raw forms) and not on the entire agri-business income enhanced by the added value of farm products due to processing. Hence, it is more appropriate to determine the Capitalized Net Income (CNI) of rubber plantations based on the actual yield and farm gate prices of raw products (field latex and cuplump) and the corresponding cost of production.
There is also a growing market for old rubber trees which are estimated to generate net incomes ranging between P20,000 and P30,000 per hectare or an average of about P100 per tree, depending on the remaining stand of old trees at the end of its economic life. This market condition for old rubber trees was not present at the time LVG No. 6, Series of 1990, was being prepared. (The terminal or salvage value of old rubber trees was at that time pegged at only P6,000 per hectare, representing the amount then being paid by big landholders to contractors for clearing and uprooting old trees.
LVG No. 6, Series of 1990, was therefore revised to address the foregoing considerations and in accordance with DAR Administrative Order (AO) No. 05, Series of 1998. IaEHSD
II. COVERAGE
These guidelines shall cover all rubber plantations whose valuations are in process and not yet covered by a Memorandum of Valuation (MOV). Specific procedures and schedules are herein prescribed for uniform application in the computation of Land Value (LV).
Separate Guidelines shall be issued in another Memorandum Circular for rubber plantation claims covered by MOV and under review by DAR Adjudication Board (DARAB) due to the landowner's rejection of the approved valuation.
III. VALUATION PROCEDURES
A. STATEMENT OF NET INCOME SUBMITTED BY LANDOWNER
1. As provided under Item II.B.2. of DAR AO No. 05, Series of 1998, the production and cost data submitted by the landowner (LO) shall have to be validated and verified by DAR and LBP personnel.
If the time gap between 1) the date of the production/income statement submitted by the LO to the DAR in the claim folder and 2) date of claim folder receipt by LBP for processing is more than six (6) months, the LVLCO shall require the LO to submit an updated income statement. The updated statement shall further be evaluated in relation to industry data.
2. The LO's declared tree inventories shall have to be compared against the result of random sampling (see Annex A for the sampling procedures) conducted at the time of Field Investigation (FI) and the standard tree density per hectare presented in Annex B, and the lowest figures shall be adopted.
3. The income and production data submitted by the LO which are verified and validated by LBP/DAR shall be considered in the computation of CNI.
a. If the LO's income/production data (AGP, SP, CO and inventory of standing trees) is verified and validated against industry figures and other records, to be attainable and reasonable based on the actual condition of the standing trees at the time of EI, the CNI shall be computed as follows:
(AGP x SP) – CO NET INCOME
CNI = ———————— = ———————
0.12 0.12
b. There are cases where some of the production/income data provided by the LO (e.g., AGP, SP, CO, inventory of standing trees) could not be easily verified/validated, such that CNI cannot be computed by directly applying the formula provided in Item III.A.3.a above. In said cases, the valuation procedures and data matrices prescribed under Item III.B. shall be used in computing for the CNI.
B. LO's STATEMENT OF NET INCOME NOT AVAILABLE OR PRODUCTION DATA SUBMITTED COULD NOT BE VERIFIED/VALIDATED
B.1. VALUATION OF YOUNG, "NON-TAPPABLE" TREES
1. Determine the number of blocks of trees having similar age, the area of each block and the density of trees in each block. The planting density appearing in the LO's inventory records, if available, may be validated and verified by establishing the actual plant spacing (row and tree distances, in meters). Based on the actual row and tree distances, the planting density per hectare for rectangular and square planting patterns is estimated by the following formula:
10,000 sq.m. per ha.
Plant density = —————————————
(Row Distance x Tree Distance)
The row distance refers to the spacing between plant rows while the tree distance refers to the spacing between plants in a row.
2. Depending on the size of the farm 1, the age of trees and the planting density adopted, the cumulative development cost per hectare (CDC) of a rubber plantation is shown in Annex C.
3. For the purpose of computing CDC as of the date of LBP Claim Folder (CF) receipt for processing, a schedule of average yearly development cost per hectare (YDC) is provided in Annex C-1. The process of computing CDC up to the nearest date of LBP CF receipt is shown in Annex C-2.
4. After establishing the CDC of blocks planted to rubber trees which are not yet "tappable", the value of the land shall be computed in accordance with the formula prescribed under Item II.A.4 of DAR AO No. 05, Series of 1998, as shown below:
LV = (MV x 2) + CDC
Where:
MV = applicable Unit Market Value (UMV) classification of
idle land
CDC = CDC value established in Item III.B.1.3 above.
B.2. CNI COMPUTATION FOR PRODUCTIVE, "TAPPABLE" TREES
1. Determine the number of blocks of trees having similar age, the area of each block and the density of trees in each block. The LO's declared tree inventories, if available, shall be compared with the result of random sampling conducted at the time of FI (see Annex A for the sampling procedures) and the standard tree density per hectare presented in Annex B, after which the lower figure shall be adopted.
2. Depending on the size of the farm, the planting density adopted, tapping practice and the form of products harvested (latex or cuplumps), the average rubber yield per tree in Kilogram Dry Rubber Content (KDRC) and the average net income rate (NIR) is shown in Annex B (given different tapping practices, plantation size and planting density).
3. Using the AGP and NIR data provided in Annex B, compute the CNI for each age-block using the following formula;
(AGP/Tree x No. of Trees x SP) x NIR
CNI = ————————————————
0.12
4. The AGP per tree shall be based on the age of trees at the time of FI.
If the time gap between the date of FI and the date of CF receipt is six (6) months or less, adopt the applicable AGP per tree based on the age of trees established at the time of FI.
If the time gap between the date of FI and the date of CF receipt is more than six (6) months up to 12 months, add one (1) year to the age of trees established at the time of FI. Determine the applicable AGP per tree based on the adjusted age of trees.
5. The available industry data on farm gate prices of fresh field latex and cuplumps are usually expressed in terms of their respective fresh or wet weight. Since the recommended AGP per tree for rubber (in the absence of LO or industry data) as shown in Annex B, is expressed in Kilogram Dry Rubber Content (KDRC), there is a need to convert the SP expressed in its wet weight into its dry weight equivalent. The KDRC of latex and cuplump varies depending on the quality of extracting and handling latex in the aging of cuplumps, respectively. In the absence of any other information, the following are suggested conversion factors:
1 Kg. Fresh Field Latex = 0.31 KDRC
1 Kg. Cuplump = 0.55 KDRC
(The above conversion factors were the average recovery rates achieved by various rubber processors.)
6. The farmgate price of cuplumps is available at the Regional Offices of the Bureau of Agricultural Statistics (BAS). Since fresh field latex is not commonly traded at local buying centers but is being processed directly by a few rubber processors specializing in latex processing, the selling price of latex is not included among the monitoring activities of BAS. The DAR Regional Offices and LBP's Land Valuation and Landowners Compensation Offices (LVLCOs) shall be tasked to monitor the average monthly selling prices of the aforesaid farm products. SP data for fresh field latex could be sourced from rubber processors engaged in the processing of latex. EaIDAT
7. Since the quality of tapping greatly affects the productive life span of rubber trees and in order to discourage those landowners who practice indiscriminate tapping (e.g., high frequency tapping, slaughter tapping), the standard AGP data provided in Annex B shall be subject to a downward adjustment depending on the actual condition of the tapping panel 2 at the time of FI. The reduction rate, depending on the actual condition of the trees, shall be set at a maximum of 10%. The parameters which will determine the level of adjustment are shown in Annex D. (These parameters were based on the suggestions of rubber plantation owners, rubber tappers and those who are considered authorities in rubber.) An Illustrative Example showing the process of adjustment in the AGP is shown in Annex D-1.
B.3. CNI COMPUTATION FOR OLD TREES READY FOR CUTTING
1. For the purpose of these guidelines, the standard age when rubber trees are considered ready for cutting are as follows:
Age Ready for Cutting
——————————
Early Tapping (5-6 years old) 25
Normal Tapping (7 years old) 30
2. The value of lands planted to rubber trees which are ready for cutting shall be computed in accordance with the formula prescribed under Item II.A.6. of DAR AO No. 05, Series of 1998, as shown below;
LV = (MV x 2) + Salvage Value of Trees
Where:
MV = applicable UMV classification of idle land
Salvage Value of Trees = Actual Number of Standing
Trees x P100 per tree
In no case, however, shall the Unit Land Value (ULV) per hectare of lands planted to rubber trees which are more than 25 years old (for early tapping) or 30 years old (for normal tapping) exceed the ULV of productive lands within the same estate under consideration.
3. The prevailing market price of the old rubber trees shall be monitored by DAR and LBP at least every semester or as the market conditions for rubber trees warrant the same. Significant adjustments (upward or downward) in the average price of rubber trees shall be reported to DAR and LBP for study.
C. COMPUTATION OF MARKET VALUE PER TAX DECLARATION
1. In the absence of clear parameters on how the Assessor's Office determines the productivity classification of rubber land and trees and considering the unique characteristics of rubber in terms of land value, the following schedule of productivity classification shall be adopted for purposes of computing the Market Value (MV) per Tax Declaration (TD).
First Second Third
Class Class Class
Early Tapping
Tapping begins: 5 to 12 13 to 19 20 to 25
@ Age 5 Yrs. Old Yrs. Old Yrs. Old
@ Age 6 6 to 12 13 to 19 20 to 25
Yrs. Old Yrs. Old Yrs. Old
Normal Tapping 7 to 14 15 to 21 22 to 30
Yrs. Old Yrs. Old Yrs. Old
2. There shall be three (3) productivity classifications for rubber land and trees. The said classifications shall apply only to productive rubber land and trees. Lands planted to young (non-tappable) and old (ready for cutting) rubber trees shall be classified as idle land in accordance with Item Nos. II.A.4 and II.A.6, respectively, of DAR AO No. 05, Series of 1998.
D. IDLE PARCELS AND AREA/S TRAVERSED BY PLANTATION ROADS
Contiguous area/s exceeding one hectare, without trees, shall be valued separately as idle land. However, idle parcels with areas of less than one hectare (brought about by tree mortality), at various locations in the block shall be considered as part of the planted areas. Plantation roads traversing the estate and which are merely cleared and levelled without any filling materials shall also be considered as part of the planted areas. Plantation roads which are made of concrete, asphalt and macadam shall be valued separately using the standard appraisal approach for improvements.
E. VALUATION OF PLANTATION AREAS WHERE OLD AND PRODUCTIVE TREES WERE ALREADY CUT AND SOLD BY THE LANDOWNER
In cases where the landowner had already cut and sold the old and/or productive trees at the time of processing/valuation, the affected area of the property shall be considered as idle land. The value of the affected area shall be computed in accordance with the formula prescribed under Item II.A.3 of DAR AO No. 05, Series of 1998, as shown below:
LV = MV x 2
F. ILLUSTRATIVE EXAMPLE
Annex E illustrates the application of the valuation concepts/principles presented in these Guidelines. ADaSET
IV. REPEALING CLAUSE AND EFFECTIVITY
All orders, circulars, rules and regulations inconsistent herewith are hereby revoked, amended, or modified as the case may be.
This Joint Memorandum Circular shall take effect ten (10) days after its publication in two national newspapers of general circulation pursuant to Sec. 49 of RA 6657.
Metro Manila, April 15, 1999.
(SGD.) HORACIO R. MORALES, JR.
Secretary
Department of Agrarian Reform
(SGD.) FLORIDA P. CASUELA
President and CEO
Land Bank of the Philippines
Footnotes
1. Rubber plantations with an area of 40 hectares and below are considered as small farms while those plantations with an area above 40 hectares are considered as large farms.
2. A tapping panel is an imaginary vertical rectangular panel in the main trunk of the tree with a standard height of 1.5 meters measured from the base of the rubber tree and width equivalent to one-half of the trunk's circumference.
ANNEX "A"
SAMPLING PROCEDURES IN THE DETERMINATION OF RUBBER TREE DENSITY
The following sampling procedures shall be adopted in the determination of tree density of rubber plantations:
Step 1 — Group and Count the number of trees by age.
As an initial step, determine the number of blocks of trees having similar age, the area of each block and the density of trees in each block.
The date the trees were planted should be available from records of the landowner. The age of tree, however, should be checked/validated from actual farmworkers and on the actual girth or diameter of the tapping panel of the rubber trees.
The area of a block may be checked with records of the landowner and verified by the use of a compass and pacing or tape, transit or stadia, or any available measuring devices.
Similarly, the density of trees should be counter-checked from landowners' records and verified by physical count for small areas. For areas exceeding five (5) hectares, representative sample parcels may be taken to estimate density. The minimum number of sample parcels, having an area of 0.5 ha. each (e.g. 100m. x 50m.; 125m. x 40m., etc.), shall be in accordance with the following schedule:
Table 1. Minimum Number of Samples for various Age Blocks of Plantation
Area of Age Block, ha. Minimum Number of
Sample Parcels
up to 5 Actual Count or 2 Samples
6 - 20 2
21 - 80 4
81 - 160 5
161 - 320 6
321 - above 7
The estimated number of trees is determined by the following formula:
Average No. of trees
Estimated No. of Trees per Block = per sample x Area of
Block (in Ha.) x 2
where:
Total Number of Trees of all
Average Sample Parcels
Number of Trees = ————————————————
per Sample No. of Samples
Physical No. of Number
Block Age, Yr. Area, Ha. Sample Parcels of Trees
I 10 40.0000 1 150
2 140
3 141
4 152
5 130
——
713
II 3 20.0000 1 210
2 208
3 207
——
625
III 25 20.0000 1 150
2 160
3 140
——
450
713
Block I : Average No. of Trees = —— = 142.60
5
Estimated No. of Trees = 142.60 x 40 x 2
= 11,048
625
Block II : Average No. of Trees = —— = 208.33
3
Estimated No. of Trees = 208.33 x 20 x 2
= 8,333
450
Block III : Average No. of Trees = —— = 150.00
3
Estimated No. of Trees = 150.00 x 20 x 2
= 6,000
Step 2 — In cases where the percentage discrepancy between the LO's inventory and the estimated number of trees as determined in Step 1 exceeds 15% (as shown in the following illustration), it is suggested that the sampling of trees be reviewed for that particular block/s.
| Estimated | |||||
| No. of | LO's | Percent | Tree | ||
| Tree | Inventory | Discrepancy | Count | ||
| Block | (Step 1) | (LO's Record) | Adopted | ||
| I | 11,408 | 11,600 | 1.68% | 11,408 | |
| II | 8,333 | 8,100 | 2.88% | 8,100 | |
| III | 6,000 | 7,000 | 16.67% | Recount |
1/ In cases where the landowner adopted a different planting density other than those prescribed in this table, the YDC could be generated as shown in the following illustrative example:
GIVEN:
Plantation Area = 30.0000 has.
Plant Spacing Adopted = 3m. x 7m.
REQUIRED: Generate the YDC Table
COMPUTATION:
1. Compute the planting density (PD):
10,000 sq. m. 10,000 sq.m.
PD = ——————— = ——————— = 476
3m. x 7m. 21 sq.m.
2. Compute for the total YDC:
Total YDC = Planting density x Ave. Cost per Tree 2/
= 476 trees x P72.00 per tree
= P34,272
2/ For small plantation, the average development
cost per tree during its gestation period (year 0 to
year 6) is estimated at P72.00.
3. The percentage distribution of the total YDC during its gestation period as provided by various industry sources is as follows:
Age of Percent
the Tree Y D C
1 52%
2 10%
3 10%
4 10%
5 9%
6 9%
4. Generate the YDC Table
Age of Percent Total
Tree of YDC x YDC Y D C
1 52% x 34,272 17,821
2 10% x 34,272 3,427
3 10% x 34,272 3,427
4 10% x 34,272 3,427
5 9% x 34,272 3,085
6 9% x 34,272 3,085
Total YDC = P34,272
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ANNEX "C-1"
3/ In cases where the landowner adopted a different planting density other than those prescribed in this table, the YDC could be generated as shown in the following illustrative example: CaTSEA
GIVEN:
Plantation Area = 30.0000 has.
Plant Spacing Adopted = 4m. x 9m.
REQUIRED: Generate the YDC table:
COMPUTATION:
1. Compute the planting density (PD):
10,000 sq. m. 10,000 sq.m.
PD = ——————— = ——————— = 278
4m. x 9m. 36 sq.m.
2. Compute for the total YDC:
Total YDC = Planting density x Ave. Cost per Tree 4/
= 278 trees x P120 per tree
= P33,360
4/ For large plantation, the average development cost per tree during its gestation period (year 0 to year 6) is estimated at P120.00.
3. The percentage distribution of the total YDC during its gestation period as provided by various industry sources is as follows:
Age of Percent
the Tree Y D C
1 52%
2 10%
3 10%
4 10%
5 9%
6 9%
4. Generate the YDC Table
Age of Percent Total
Tree of YDC x YDC Y D C
1 52% x 33,360 17,347
2 10% x 33,360 3,336
3 10% x 33,360 3,336
4 10% x 33,360 3,336
5 9% x 33,360 3,003
6 9% x 33,360 3,002
Total YDC = P33,360
=======
ANNEX "E"
ILLUSTRATIVE EXAMPLE
GIVEN:
Landowner (LO) : ABC Rubber Corporation
Location of Property : Goodyear, Zamboanga del Sur
Date of LO's Offer : January 19, 1997
Date of Field Invest. : November 4, 1997
Date of CF Receipt for
Processing : March 10, 1998
Planting Density : 416 trees per hectare
Tapping Practice : Normal Tapping (7th Year)
Size of Farm : Large Rubber Plantation
REQUIRED : Compute the total land value of the property.
COMPUTATION:
Since the time gap between the date of the FI and the date of CF Receipt for processing is less than six (6) months, compute the land value based on the age of trees at the time of FI.
Valuation Summary — See Annex "E-1"
CNI Computation — See Annex "E-2"
MVTD Computation — See Annex "E-3"
Total Land Value — P37,772,425
=============
Annex "E-4"
CDC COMPUTATION
ABC Rubber Corporation
1. The CDC for 4 year old trees at 416 trees per hectare planting density (See Annex C of JMC No. 1) is P41,000.
2. Grossing-up the CDC at the time of FI up to the date of LBP Claim Folder Receipt.
RCPI March '98
Grossed-up CDC = P41,000 x ———————
RCPI Nov. '97
245.7
= P41,000 x ————
236.2
= P42,649 per hectare
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