Searca study: State support to agriculture crucial as Asean economies integrate

SANTIAGO CITY, Isabela – Herculano “Joji” Co, longtime president of the Philippine Confederation of Grains Associations (Philcongrains), says his counterparts in the Asean continue to wonder why subsidy has become a dirty word among Filipino officials.

Business leaders of the region acknowledge that Asian rice-producing nations subsidize their farmers to make them competitive in the rice market, just as Japan subsidizes its farmers to ensure they continue to plant glutinous rice.

For this reason, Co stressed, he gets to be ribbed as to the reason why the Aquino administration seems to abandon palay producers to the vagaries of the market.

He noted that the study conducted by a team from the Southeast Asian Regional Center for Graduate Study and Research in Agriculture (Searca) led by the late Minda C. Mangabat of the Bureau of Agricultural Statistics (BAS), Eduardo B. Sanguyo of BAS and Mercedita A. Sombilla of the National Economic Development Authority (NEDA), underscored the crucial importance of supporting the rice industry, which is the linchpin of the rural economy.

Crucial support

Searca director Dr. Gil C. Saguiguit Jr. stressed the importance of the Mangabat study, since it delved into the reasons why the total factor productivity (TFP) for rice in the country was low, which means farmers do not maximize output from the use of fertilizer, other inputs, mechanization, labor, improved seeds and new technology.

The Searca study confirmed that higher-yielding varieties now comprise 80 percent of the aggregate rice output of the country, Saguiguit noted.

What the 38-page paper showed was that better rice seeds, improved technology and irrigation, as well as optimal training of farmers are crucial factors that lead to higher yields, and these are the inputs that farmers gobbled up in the 1960s and 1970s to raise the aggregate output and achieve rice self-sufficiency for a spell.

Co stressed that a presentation by Dr. Flordeliza H. Bordey of the Philippine Rice Research Institute (PhilRice), who headed a 21-member team that conducted a study of rice production in six Asian countries from January 2013 to June 2013, confirmed that five rice-producing nations generally provided their farmers subsidies, counting China, India, Indonesia, Thailand and down to Vietnam.

Whose rice is cheapest?

The Bordey paper entitled “Who Produces Cheap Rice?” was presented during the Global Rice Market and Trade Summit held in Bangkok from October 30 to 31 last year.

The Bordey study pointed out that, yield-wise, the Philippines harvested 6.34 metric tons (MT) per hectare, fourth among the six nations, with only Vietnam, Indonesia and China ahead.

Production cost was lowest in India at $883 per hectare, followed by Vietnam at $1,059, Thailand at $1,207 and the Philippines at $1,479. China had the most expensive cost at $1,879, followed by Indonesia at $1,849.

The level of mechanization in the Philippines was still low, and this has resulted in the country’s employing 69 man days per hectare per cropping, largely due to manual harvesting and transplanting, second-worst to Indonesia’s 80 man days per hectare.

In contrast, Vietnam only expends 23 man days per hectare, far behind Thailand’s 10 man days per hectare.

Even as Filipino rice producers use power threshers, the average power cost was still $204 per hectare, in roughly the same league as Thailand at $229 per hectare and China at $218 per hectare, although both countries use combine harvesters extensively.

Fertilizers and inputs

Fertilizer cost runs up to $229 per hectare for Filipino rice farmers, cheaper than $241 per hectare for Vietnam and $340 per hectare for China. An Indian farmer only spends $93 for fertilizers per hectare while an Indonesian rice producer pays only $139 per hectare.

Co noted that for urea, a Filipino farmer spends $0.51 per kilo, the same price paid by a Thai farmer, but potash is most expensive in the Philippines at $0.76 per kilo.

Pesticide use in the country is also declining, with rice farmers paying only $42 per hectare and applying pesticides and other inputs six times per season, the second cheapest cost among the six countries surveyed.

Finally, the study said that the production cost for Philippine rice was $233 per MT, the cheapest among importing countries since the cost in China was $287 per MT and $277 per MT in Indonesia.

Among the exporters, the cheapest rice was in Vietnam at $156 per MT, India at $188 per MT and Thailand at $212 per MT.

The rice exporting countries are hugely dependent on pesticides and other agricultural inputs to battle infestation even as they come out being cost-efficient and have the highest yield and lowest unit cost.

Subsidizing the industry

Buoyed by the Bordey findings, Piedad F. Moya, an economist and a team member from the International Rice Research Institute (IRRI), told participants in a PhilRice conference on September 3, 2014 that “subsidizing the agriculture industry is better than subsidizing farmers directly.”

She added: “The Philippines can be competitive, come ASEAN Integration, with the right support from the national government. Something must be done to the costly production of rice in the country.”

Moya explained that, in other Asian countries, the subsidy goes directly to the agriculture industry, in such forms as fertilizer and seed companies.

“In this way, every farmer benefits from the subsidy, compared to giving seeds directly to them because it is difficult to track if the seeds are fairly distributed,” she stressed.

As expected, Co said, the Philippines provided the least subsidy to its rice farmers, pushing farmers to pay 4% monthly interest to loan sharks who effectively “service” up to three out of four poor farmers trapped in the debt cycle.

Small farm holdings

In batting for rice self-sufficiency, the Searca team led by Mangabat pointed out in their paper titled “Productivity in the Rice Sector in Philippine Agriculture” that “rice is cultivated in small farms that average slightly higher than a hectare.

“It is the major source of livelihood of most small farmers and agricultural landless workers. It is in consideration of the small farm characteristics that increasing the incomes of rice households remains a big challenge.

“Hence, the continuing objective of the country’s agriculture sector is to increase yields in pursuit of self-sufficiency for his major grain as well as to increase incomes and improve household welfare.”

Irrigation
Co explained the Searca study was correct in arguing for irrigation coverage that is much higher than the 68% (roughly two thirds) of all rice farms being served today.

The Bordey study confirmed that China, India, Thailand, Indonesia and Vietnam provides free irrigation services, while the National Irrigation Administration (NIA), complained farmers belonging to the Kilusang Magbubukid ng Pilipinas (KMP), charges them five cavans of palay or P4,500 for every hectare watered for an entire year.

Without irrigation for the thirsty rice paddies, Co said, farmers would incur more losses and turn to the loan sharks with their 4% per month interest, while Thai farmers pay only 0.6 percent in interest to lenders.

Co said that, with up to 75% of poor farmers dependent on informal lenders, the situation effectively renders both the Land Bank of the Philippines (LBP), which does not lend to individual farmers anyway, and the rural banks, hugely irrelevant. –Diego Mora, InterAksyon.com