Bare Truth by Rose de la Cruz
Bare Truth

Govt must subsidize farm inputs

Jul 23, 2022, 12:29 AM
Rose De La Cruz

Rose De La Cruz


The glory days when the Philippines exported rice and taught its neighbors (Vietnam and Thailand on rice farming technologies which led them to be major exporters now) occurred when government was heavily subsidizing farm production inputs, particularly fertilizers, pesticides and seeds. Those were the Masagana 99 days.

Then foreign lenders advised the government to wean away from subsidizing farm production and introduced them the concept of grains stabilization through a combination of buying local palay and importing cheaper rice for assured stocks for the local market. This then started the propensity for importing rice.

Now, the Philippines has been expanding its import of rice by nearly 30 percent yearly to 1.887 million in the first half of 2022 because of the demand for cheaper supply.

Latest Bureau of Plant Industry (BPI) data showed that rice imports from January to June rose by 433,000 MT from 1.454 MMT recorded in the same period of last year.

Rice industry sources said the landed cost of imported rice remains cheaper than the locally- produced staple, making it more profitable for entities to import rice, said a report of Business Mirror.

“It’s always about the price. If the landed cost of imported rice plus tariff is cheaper compared to local rice, they will want to import more,” an industry source, who requested anonymity, said.

Some noted that rice prices in key Philippine suppliers, particularly Vietnam, have remained relatively stable in the past months and even lower compared to last year’s quotations.

Latest Food and Agriculture Organization (FAO) global price monitoring report showed that Vietnam rice prices range from $396.5 per metric ton (5 percent broken) to $416.8 per metric ton (25 percent broken).

This translates to a rice price of P21.8 per kilogram to about P22.92 per kilogram at current exchange rates.

FAO data showed that the average price of Vietnam rice (5 percent broken) from January to May stood at $401.2 per metric ton, 19.55 percent lower than last year’s average quotation of $498.7 per metric ton.

Rice industry players have been also stockpiling rice this year amid expectations of tight domestic supply and lower local output due to a spike in production inputs, such as fertilizer

Vietnam, Myanmar

BPI data showed that Vietnam remained the country’s top rice supplier at 1.517 MMT, followed by Myanmar at 153,969.28 MT.

BPI data also showed that rice imports from Pakistan, which has been benefiting from lower tariff rates, continued to grow, reaching 111,550.675 MT in end-June.

Rice imports from Thailand reached 95,173.125 MT, while imports from China and India reached 3,591.5 MT and 5,168.385 MT, respectively.

The BPI also issued 453 sanitary and phytosanitary import clearances (SPS-ICs) for rice in June, which has a corresponding total applied import volume of 644,244 MT. The BPI, the agency mandated to oversee rice imports, only issued SPS-ICs in June, based on the agency’s data.

Agriculture officials have openly said the country would have to resort to importation to boost domestic rice supply, especially if local production continues to fall amid skyrocketing fertilizer and fuel prices.

Higher production cost

The DA has estimated that the production cost of rice has increased by P3.13 per kilogram, with total rice output projected to fall by 800,000 MT this year.

Agriculture officials noted that the country has sufficient rice stocks during the lean months of July to September. However, they cautioned that rice imports may have to breach the 2-MMT mark to ensure sufficient full-year stocks amid various global economic challenges.

Since the start of the rice trade liberalization (RTL) law or Republic Act 11203 in early 2019, the country’s annual rice imports have been above 2 MMT. Last year, total rice imports were at 2.771 MMT.

The United States Department of Agriculture (USDA) had projected that the Philippines could retain its status as the world’s second largest buyer of rice for the fourth consecutive year in 2023, when total import volume is projected to reach 3 MMT. The USDA said the Philippines’s rice imports this year and next year would hit 3 MMT.

Bloomberg report

In an article dated July 20, Bloomberg said concerns are rising over the ability of Southeast Asia to retain its title as a major rice supplier to the world as countries such as Indonesia and the Philippines struggle to even produce enough for their own needs.

Current yield trends will not allow the two countries to be self-sufficient in rice, according to a study published in Nature Food journal in March. This means they will have to rely on imports to meet domestic demand for a staple crucial to food security, political stability and export potential.

“The new millennium has brought a number of challenges to rice systems in Southeast Asia,” the researchers said, citing increasing rice demand, yield stagnation and limited room for cropland expansion. “Concerns about rice shortages are back.”

The findings come at a time when worries over food security are growing around the world as Russia’s invasion of Ukraine puts one of the world’s major breadbaskets in jeopardy, further pushing up food prices that had already been on the rise. Still, rice prices have been relatively subdued due to ample production and stockpiles in top growing regions, keeping the food crisis from getting worse.

Nonetheless, the region is not immune to global price shocks. Countries with high energy and food weights within their Consumer Price Index (CPI) baskets, such as the Philippines, India, Thailand, and Vietnam, are particularly vulnerable to food and energy inflation.

Food importers’ current account balances will also deteriorate if food prices remain elevated. Net food import dependence in key cereals consumed in Asia, such as rice and wheat, is high in the Philippines as indicated by its trade deficits. China’s and India’s net agriculture trade balances in these cereal crops are not in deficit, indicating some degree of self-sufficiency.

Prospects for rice self-sufficiency vary by country. Thailand and Vietnam produce more than they consume, while Indonesia and the Philippines “have struggled consistently” to meet rice demand from their own production, relying on imports, the researchers said.

It’s particularly crucial for regions like sub-Saharan Africa and the Middle East that Southeast Asia continues to produce a large surplus of rice, the researchers added, as it can help reduce global price volatility.

Subsidize farm inputs

Some groups on Wednesday urged the government to provide fertilizer subsidies to farmers to help increase their production in the face of increasing costs in the market and the perceived food crisis.

Leonardo Montemayor (former DA Secretary), chair of the Federation of Free Farmers, stressed that the lower fertilizer usage could impact the volume of rice production in the harvest season in the last quarter of the year. He projected that the drop could be around 10 to 15 percent.

“Immediate ‘yung pagpapalawig ng fertilizer subsidy because many, if not most farmers, have really cut down in their fertilizer usage. Consequently, siyempre, ‘yung ani ng palay, ‘pag giniling ‘yan (at ginawang) bigas, magda-drop ‘yan,” said Montemayor on One News’ Agenda.

This after President Marcos, himself the concurrent DA Secretary, revealed his plan to engage in government-to-government deals to address the high cost of fertilizers. China, Malaysia, and the United Arab Emirates are some of the countries he intends to talk to.

“Gusto tayong tulungan, gusto tayong lapitan, eh ‘di take advantage naman tayo, ‘di ba?” said Marcos in a statement issued by the Malacañang. “I’m thinking would it be useful for us if I wrote a letter to all of them and I’ll say that we are in the market to buy this volume of fertilizer.”

Prices of fertilizers vary depending on the type and the area. According to the Fertilizer and Pesticide Authority, urea was sold at P2,430 to P2,814 from last February to April. Granular urea was at P2,430 to P2,826.

Montemayor noted that direct G-to- G negotiations would be helpful but it would take time. He also stressed that the retail prices must also be fixed.

“To me, the issue of the price of palay is the most critical. The market price of palay should be attractive enough to cover the basic costs of farmers in producing that. Otherwise, they are just producing to make themselves lose money,” said Montemayor.

Rosendo So, the president of Samahang Industriya ng Agrikultura, also agreed that fertilizer subsidies for farmers are crucial in the short term. He, however, noted that the cost of fertilizers increased even before Russia launched its war against Ukraine, citing the high demand from different countries.

“If we will not give subsidies to farmers, we will have a high price of palay. The price of our rice will not go down,” So told One News’ Business World Live.

Marcos promised to bring down the cost of rice to P20 per kilo during his campaign but experts doubt about the feasibility of the plan. But So has remained positive this can happen in three to four years.

“We are hoping food security will only come from local production, with ample government assistance and subsidy to the farmers,” said So.

Fertilizer import deals

Reuters reported on Wednesday that Marcos plans to reach out to China, Russia, Indonesia, United Arab Emirates and Malaysia for fertilizer supplies at favorable prices.

Marcos has vowed to boost agricultural output over the next six months, saying he wants the Southeast Asian country to reduce its reliance on food imports and avoid being hit hard by a food crisis looming over the world.

Agriculture officials have warned of higher local prices of rice, the country's staple food, in the coming months partly due to surging costs of fertilizer, supplies of which have been disrupted by the Russia-Ukraine war. The Philippines imports most of its fertilizer needs.

The Philippines uses 2.5 million tons of fertilizers every year, according to the Fertilizer and Pesticide Authority.

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