No. 75 - March 2006
Agriculture Performance in 2005
Lean Harvest
By Delfin E. Trinidad

Total agriculture production reached 79.8 million metric tons in 2005, down by 3.7% over the 2004 level. The lower production volume was attributed to the dry spell in the first half as well as excessive rains and typhoons thereafter.

Other factors that brought down production included infestations and shift to other crops. Insufficient funds and the bad timing of disbursements also contributed to 2005’s weak output. Some commodities, though, posted higher production due to increased areas for plantation, adoption of quality seeds, better application of fertilizers, and greater demand.

Gloomy picture

Almost all the agricultural subsectors in 2005 failed to match 2004 performance. Livestock was the lone subsector which recovered from losses incurred in 2004. Agricultural crops suffered the biggest with a 4.5% decline from a 5.4% growth in 2004. Poultry shrank 1.4%. Fishery grew 6%, down from its previous growth of 8.5%.

Despite the negative overall growth in agriculture crops, some crops shined in gloomy 2005. Calamansi’s huge leap in output was attributed to the increase in number of bearing trees in Occidental Mindoro, Oriental Mindoro, Marinduque, Romblon, and Palawan and plantation farms in Batangas. The rise in banana, pineapple, and tomato production benefited from the addition of bearing trees, hills, and plantation areas. Meanwhile, higher export demand for crops in South Cotabato, Cotabato, Sultan Kudarat, Sarangani, and General Santos City raised regional agricultural production, particularly of peanut, cassava, mongo, pineapple and banana. Good weather conditions, sufficient rainfall and expansion in areas of plantations pushed camote production in Agusan del Sur, Surigao del Sur, and Leyte.

El Niño and typhoons severely affected palay output, which managed a dismal growth of 0.7% in 2005 from 7.4% in 2004. In the last quarter, the crop subsector bounced back because of improving weather conditions, the use of hybrid and quality inbred seeds, and technology support from the local government units and the GMA Rice Program.

Corn production slumped 3% in 2005 on account of the dry spell and the high cost of fertilizer and other farm inputs. In Central Mindanao, corn farms were flooded from excessive rains and were infested by rats. Other unfortunate crops, including garlic, onion, tobacco, and sugarcane, posted losses ranging from 5.4% to 18.7%. Garlic producers who shifted to corn and onion faced competition from low-priced imports and infestation from the mosaic virus. The closure of sugar mills in Tarlac and Cotabato, and delayed sugarcane milling in Northern and Central Mindanao and SOCCSKARGEN dragged sugarcane production down. Despite the sharp drop in production volume, sugarcane even emerged with the highest volume among agricultural crops in 2005.

COUNTING THE COST

Admittedly, the availability of inputs at the right price to farmers contributes to agricultural productivity. Thus, lower costs of fertilizers should bring down production costs and enable local growers to gain a sufficient margin of profit. In February 2006, the prices of urea, complete, and ammophos fertilizers shot up 3.2%, 4.2%, and 4.5% respectively. High costs of production discouraged farmers from planting, and left some farms idle. If the price of these inputs remain high for the rest of the year, prospects for growth in agricultural production in 2006 look dim.

BETTER OUTLOOK

The dismal agricultural production in 2005 prompted the Department of Agriculture to exert more effort to double agricultural output this year and target growth of no less than 4%. Cheaper fertilizers, bigger areas for hybrid rice and banana production, and the identification of land for palm oil cultivation are expected to contribute to a better outlook. Global demand for banana, mango, coconut, coffee, pineapple, coconut oil, tuna meat, and carrageenan also remains high.

All regions, except Central Luzon, expect rice production in the first half to improve by 5% as a result of better access to irrigation, the extensive use of hybrid and quality seeds, expansion in harvest areas, and continued support from LGUs and the GMA Rice Program. Similarly, corn is expected to enjoy the same favorable conditions, projected to surpass 2005’s first semester output by 33%. However, Central Luzon and the Davao region are suffering from rising production costs. Davao is therefore shifting to banana and cassava, while Tarlac is diverting to sweet potato and turnips.

The Department of Agriculture announced that as of February 2006, rice production rose 2.3% year-on-year. The agency projects a 7% growth in rice production, coming from 330,000 hectares out of 716,000 hectares planted. In anticipation of the La Niña, DA is converting 120,000 hectares devoted for corn production into rice.

Corn production also rose 25% as of February 2006 but chances are, the crop may still miss its 1.6 MT target. Areas for corn production will also be transferred to South and North Cotabato, Maguindanao, Sultan Kudarat, Davao del Sur, Davao del Norte, and Davao Oriental, where La Nina is not expected to have devastating effects. Heavy rains with flash floods since December 2005 ravaged some 13,000 hectares of corn in mid-February 2006.

Several factors are seen to affect agricultural production in 2006.

La Niña. The La Niña phenomenon is expected to boost rice production in 2006. According to the Philippine Atmospheric, Geophysical and Astronomical Services Administration, only a weak La Niña is expected, which will bring more water for irrigation. Provinces that will benefit from La Niña include Cagayan, Isabela, Quirino, Aurora, Tarlac, Mindoro Oriental, Camarines Sur, Aklan, Capiz, Iloilo, Zamboanga del Norte, Agusan del Norte and Surigao. In preparation for La Niña, the Agriculture Department advised farmers to plant seeds that yield in 60 to 65 days, and/or shift to sweet corn and mongo, from yellow corn and rice crops. However, fears of excessive rains resulting in flash floods and mudslides remain real in the wake of Southern Leyte tragedy last February.

Strong peso. Farmers fear a strong peso may encourage more rice importation. Rice imports in 2006 are projected to match 2005’s 1.8 million MT yield. The agriculture department aims to reduce imports by increasing domestic production to 14.9 million MT since corn farmers have been encouraged to shift to rice instead. Meanwhile, the Philippine Exporters Confederation Cebu chapter and the Seaweed Industry Association of the Philippines asked the Bangko Sentral to intervene in stabilizing the peso. The exporters warned that lower dollar earnings would scale down their operations and lead to retrenchments and shutdowns. They also complained that the cost of manufacturing inputs did not go down despite the peso’s strength. Seaweed processors are now opting to buy raw seaweed from Indonesia due to cheaper prices. Prices in Mindanao range from P30-35/kg, while Indonesia is selling at around P24/kg. Consequently, traders pass on their losses to seaweed farmers since the peso appreciated last January. Farmers complained that the price of dried seaweed fell to P14-P16 from P18-P20 a kilo last year. The discouraged farmers are back to fishing and processing dried fish.

Irrigation. The current conditions of irrigation systems in the country deter agricultural productivity. According to the National Irrigation Administration, barely half (44.8%) of 3.1 million hectares of rice lands have functional irrigation systems. The remaining lands have defective irrigation or rely solely on rain for production. Existing irrigation systems suffer from lack of operation and maintenance due to financial constraints. The government only provides P1,126 per hectare, half of the ideal maintenance budget of P2,400 per hectare.

As an example, the Banaue rice terraces is already deteriorating due to lack of irrigation and giant earthworms. There are currently 7,000 hectares in Ifugao not yet irrigated due to budget constraints.

Avian flu. Since last year, the biggest threat to chicken production has been the avian influenza (H5NI strain). The Agriculture Department’s Avian Influenza Prevention Plan to avert a flu crises involves a massive nationwide information campaign; systematic testing, surveillance and monitoring of hot spots; effective border control and quarantine measures; and phase by phase contingency and emergency protocols. Recently, New Zealand Prime Minister Helen Clark announced a contribution of US$340,000 for strengthening the country’s capacity to detect and diagnose avian flu outbreaks.

As for rice production, one threat has been the emergence of the rice black bug infesting four towns in Sorsogon. RBB thrives in marshy and muddy areas, and transfers to other islands, following the direction of the moon or the lunar cycle. It can cause total crop damage. Back in 1982, the bug damaged some 4,500 hectares of rice land in Palawan, Zamboanga City, Cotabato, Sultan Kudarat, Siquijor, and Occidental Mindoro.

Hoarding. Consumers felt an artificial sugar shortage early this year. Traders and speculators reportedly hoarded sugar on account of low production in the current planting season and in anticipation of surging prices. The National Food Authority said it would intervene in the pricing and supply of domestic sugar as refined sugar was noted at P50 per kilo early in March from P36 in February. The Trade Department’s inspections, however, revealed normal sugar supply levels. The Sugar Regulatory Administration projected sufficient buffer stock to match domestic demand until June. SRA reported sugar production reaching 1.4 million metric tons in February, around 70% of the 2.0 billion MT projection.

AGRICULTURAL EXPORTS

Growing 6.9% in 2005, agriculture exports reached US$2 billion, contributing 4.9% to total exports. Coconut products, molasses, canned pineapple, pineapple juice, and bananas grew by double-digit rates. On the other hand, exports of unmanufactured tobacco, raw coffee, ramie fibers, abaca fibers, fish and preserved shrimps and prawns declined.

PROSPECTS

Rice. SL Agritech Corp will export 200 MT of hybrid rice seeds to Bangladesh starting August via the state-owned Bangladesh Agricultural Development Corporation. SLAC Chairman Henry Lim Bon Liong warned that Bangladesh might overtake the country in exporting rice once seeds of the tropical hybrid rice are imported. The 10,000 bags of seed export is only an initial volume since the Bangladesh firm aims to plant them on at least 10,000 hectares of potential rice land. Meanwhile, Isabela farmers are gathering bigger volumes of hybrid rice to save on shipments for exporting to the Middle East.

On the other hand, Indian rice might enter the local market should India agree to quota arrangements with the Philippines, similar to that of China, Thailand, the United States, and Canada. Thailand announced that it might no longer export rice for its own security. China is purchasing all surplus rice available in the world market.

Abaca. DA expects abaca exports to boom this year due to the discoveries of new applications for the product such as composite panels of luxury cars. Expected growth this year is 5-10%. The Philippines is the only exporter and main supplier of abaca pulp used to manufacture security and or currency papers, cigarette filters, meat and tea casings, medical materials and other high grade non-woven materials. The Fiber Industry Development Authority claims insufficient supply to cater to the market since the industry remains in recovery from diseases, with meager funding for insecticides.

Mango. The newly formed Mango Contractors Association will be focusing on monitoring the quality of Davao’s mango industry. The group will be promoting correct agro-chemical application procedures, in response to Japan’s refusal to accept mango shipments from the country. The mangoes flunked certain environment- and health-related standards due to chemical residues. The group aims to increase production in Davao by at least 25%, and lower industry-wide post-harvest loss to 5%.

China recently required Philippine mango exports to undergo vapor heat treatment (VHT), fearing that seed weevil disease may contaminate local orchards. Exporters complained that VHT would significantly add to production costs, reducing its competitiveness in the market. The government is asking China for the deferment of the measure and requesting for its scientific basis. It may also lodge a complaint for “unjustified trade barrier” at the World Trade Organization.

Banana. The prospect of exporting to Australia remains bleak as Biosecurity Australia said that the Philippine Banana Growers and Exporters Association refused to cooperate and rejected their team’s request to seek further clarification in the revised import risk analysis. The local growers justified their actions, stating that all the information required had already been submitted to Australian officials in 2004. Banana growers in Australia believe that the entry of Philippine bananas would bring and spread exotic pests and diseases to local banana farms, such as Black Sigatoka, Moko, freckles, and mealy bugs. The Australian Banana Growers Council is also lobbying for an alternative national banana levy proposal, aggravating Philippine banana exporters’ chances of penetrating the Australian market.

Coconut. Malaysia, Indonesia, China, India, and the Philippines are all aiming to raise their coconut oil processing capacities by 700,000 MT to address foreign and local demand. Industrial oil is said to command a higher premium of US$20-30 more per MT compared to crude oil. In the Philippines, Minola Refining Corporation, a joint venture of Coconut Industry Investment Fund and Mitsubishi Corp., is building a second refinery in Bauan, Batangas to meet higher demand for edible and industrial oil in local and foreign markets. MRC plans to expand its coconut oil processing capacity with additional 45,000 metric tons, and eventually upgrade from producing crude coconut oil to industrial and edible oils.

Sugar. The US raised its quota on sugar after two hurricanes destroyed its sugar-producing states in 2005. Around 148,000 metric tons of quota sugar have been scheduled for shipment from the Philippines to the US before May 2006. Stakeholders are now working on an additional 50,000 metric tons of exports to meet the quota, which will then be replaced by the same quantity of imports by the Sugar Regulatory Administration.