No. 88 - April 2007
Upgraded Meal
Percentage distribution of sub-sectors in total agricultural output, 2006

By Roxanne V. Lu , MBC Senior Research Associate

In 2006, the agricultural sector grew by 3.9%, producing 85.7 million metric tons (mt) of farm products. In terms of value, the farm sector grossed P887.6 billion at current prices in 2006, increasing by 8.6% from 2005’s production value of P817.2 billion. Farm production that grew by 5.2% in the first half of 2006 cushioned the negative impact brought about by the typhoons.

Typhoons Milenyo, Paeng, Queenie, Reming, and Seniang ravaged the country from September until the end of the year, causing billions of pesos worth of damages to industries, most especially to the agriculture sector. Typhoons Reming and Seniang alone were reported to have incurred damages to agriculture amounting to P2.6 billion.

Of the total agriculture pie, the crops sub-sector contributed 47%, followed by fisheries, contributing 25%, while the remaining slice was shared by poultry (15%) and livestock (13%) sub-sectors.

Although it failed to hit the projected 4% growth for 2006, the farm sector last year outperformed 2005’s dismal growth of 2.2%. All sub-sectors, except poultry, posted significant increases in output after enjoying months of good weather, as well as prompt government assistance after typhoons hit the country in the latter part of the year.

A CATCHY YEAR

The fisheries subsector achieved the highest growth rate in production, expanding by 6.3% in 2006. Its 4.4 million metric tons produce, about 24.9% of total agriculture output, was comprised of municipal fishing production with 1.2 million mt, commercial fishing with 1.1 million mt, and aquaculture producing 2.1 million mt.

New fish farming areas in Biliran, Leyte, Samar and Zamboanga Sibugay, and the introduction and distribution of new technology by the Bureau of Fisheries and Aquatic Resources (BFAR), contributed to the growth of the subsector. In addition to these, a high stocking rate for milkfish was achieved due to availability of fingerlings in Ilocos Sur, La Union, and Pangasinan. The high demand for seaweeds and good weather conditions encouraged farmers to plant more seaweeds in 2006.

IMPROVED HARVEST

In 2006, crops production expanded by 4.4% at a production level of 77.4 million mt. The top five crops produced were palay (15.3 million mt), corn (6.1 million mt), coconut (14.9 million mt), sugarcane (24.3 million mt), and banana (6.8 million mt).

Improved yields, particularly in grains and corn, were attributed to the seed and fertilizer subsidies extended by the government, such as the Ginantuang Masaganang Ani (GMA) Rice and Corn Program, as well as to the expansion of planting areas, and to the use of hybrid and quality inbred seeds.

Palay volume grew by 5% in 2006, from 14.6 million mt in 2005. Its value in current prices also recorded an increase of 4.4%, from P155.6 billion to P162.4 billion. Better rice harvests were also noted after 120,000 hectares of land originally intended for corn were shifted to rice plantings earlier in the year, taking advantage of the La Nina’s good effect on rice. As a result, rice importation was reduced to 1.7 million mt from 2005’s rice import of 1.82 million mt. Corn planting was encouraged in new production areas like Cotabato, Davao, Maguindanao, and Sultan Kudarat to take advantage of less heavy rains in those provinces.

Corn, one of the country’s major food crops, as well as a major ingredient of livestock and poultry feeds, increased its output by 15.8%. This significant increase in volume was largely due to improved weather conditions in the first half of the year, the sustained subsidies and financial programs of the government, and the support projects of private groups. Value and area harvested for corn, likewise, grew by 36% and 5.3% respectively. Top producers for corn were Cagayan Valley, producing 1.2 million mt, and SOCCSKSARGEN, producing 1.1 million mt.

Another top crop is sugarcane, which grew by 6.2% in 2006. This growth was from the expansion and early milling activities of some private corporations in Negros Occidental in the first, third, and fourth quarters of 2006. The use of high yielding varieties of sugarcane in Pampanga also contributed to this expansion.

Notable output gains were also recorded with cassava at 4.7%, rubber at 11.4%, pineapple at 2.6%, and peanut at 2.5%. Coconut production, meanwhile, managed to reach the 0.90% output increment in 2006 as the decline in copra prices sparked higher demand in the third quarter of the year. Coconut trees intercropped with corn, as done in Mindanao, benefited from the fertilized corn area, which also boosted production.

Coffee production, on the other hand, experienced a setback due to losses incurred with the typhoons, and crop shifting, The coffee-producing areas in Davao and the Soccskargen regions have shifted to planting bananas and rubber. From 127,000 hectares of coffee areas that produced 105,850 metric tons in 2005, coffee areas have dropped to 126,000 hectares, producing only 104,090 metric tons in 2006. Like in the past, one of the major factors of the drop was discouragement of farmers to plant coffee because its farmgate price dipped to P51.02 per kilogram in 2006 from P61.39 per kilogram in 2005.

STOCKED UP

The livestock subsector, which includes, carabao, cattle, hog, goat and dairy, posted a 2.5% increase in production from 2.2 million mt to 2.3 million mt. Dairy had the highest growth rate in the group, a 4.3% increase, owing to a continuous increase in milk production from both carabao and cattle in both commercial and cooperative dairy farms. This was followed by hog volume with 3.9% increase due to the yearlong records of increases in the number of fatteners, especially the increases in fattener inventory in CALABARZON.

However, production of cattle and carabao decreased by 3% and 2%, respectively, due to the drop in volume of slaughtering in different regions. There were also fewer stocks for slaughter because of a shift in demand for work animals in the second quarter. Goat production also declined by 3.2%, due to the delayed building of breeding stocks in the third and fourth quarters of 2006.

PRODUCTION SPLAT

In 2006, only chicken eggs posted positive output of 3.11% growth for the entire poultry sub-sector. The good performance of chicken eggs was attributed to higher inventory of chicken layers and better egg-laying efficiency ratio observed in the middle of 2006.

The rest of the poultry products, meanwhile, registered declines in output, with duck, duck eggs and chicken decreasing by 6.9%, 6%, and 0.80% respectively. This was caused by the decrease in broiler production in the regions of Western and Central Visayas. Furthermore, production in commercial farms was reduced as a result of the depletion of stocks of culled layers due to the avian flu scare in the early months in 2006, thereby affecting duck production.

Overall, it was a gloomy 2006 for the poultry sector which posted a 0.4% decrease in volume of production. Producers cited the inadequate forward integration and lack of government control over small-scale operators as major concerns of the industry.

TRADING GOODS

The agricultural sector’s balance of trade is at a downtrend. From a deficit of US$1.14 billion in 2004, the trade balance worsened to US$1.28 in 2005, in 2006 to US$1.53 billion. Total agricultural exports in 2006 amounted to US$2.8 billion, up by 3.3% from 2005. However, total agricultural imports went higher by 8.5% to US$4.3 billion in 2006.

Of the exported agriculture commodities, about 21% (US$579 million) was coconut oil (crude and refined), followed closely by fresh bananas with 14.5% share in total agricultural export. Trailing behind was pineapple and pineapple products, taking 8% of the food exports pie. Other top food items exported in 2006 were tuna, dessicated coconut, manufactured tobacco, shrimps and prawns, milk and cream products, fertilizer manufactured, and seaweeds.

The Department of Agriculture is keen on expanding export markets, such as China for heat processed poultry meat, and the European Union, Hong Kong, Indonesia, Malaysia and Singapore for halal poultry products.

Currently, only 2% of the country’s total meat production is being exported. Hog production in 2007 is expected to increase by 3% to reach around 1.9 million metric tons. The industry is trying to keep Visayas and Mindanao free from the Foot and Mouth Disease, and to eradicate and control hog cholera to enhance export potentials. One of the targeted destinations is Singapore, the world’s top meat importer, where the Philippines plans to export 300 metric tons of fresh and frozen meat by July 2007. The government’s focus is to strengthen Mindanao’s hog industry for world pork market penetration.

The rise in imports was significantly high in corn to make up for an apparent shortage in corn supply by 1.8 million metric tons. Critics, however, blame the shortage to hoarding. In 2005, the Philippines imported 71,000 metric tons of corn worth US$27 million. In 2006, corn imports reached a whopping 307,000 metric tons, valuing at US$59 million.

The Department of Agriculture explains that the country has enough corn supply and that the challenge is to properly match the production of farmers and the needs of corn end users. In addition, the increased demand for corn in the international market brought about by the increasing use of biofuels, and not shortage in supply, can also be the reason behind the current stiff corn prices. As a precaution, the Department of Agriculture has allowed up to 400,000 metric tons of corn imports for 2007.

BOLD TARGETS…

The government is targeting a 4-5% growth in the agriculture sector in 2007 and 7-8% in 2008. To meet this optimistic target, the government vows to increase public spending on rural infrastructure, seed technology, and other productivity programs.

However, broader issues that transcend local and regional levels affect the development of Philippine agriculture sector. The DA identified these major issues as the following:

• Competitiveness and profitability
This pertains to the sector’s ability to compete and be profitable, in terms of infrastructure investments, reduction of logistics and shipping costs, greater access to domestic and international markets for food products, access to micro-credit programs, and the rationalization of investment incentives.

• Land use administration and distribution
There is a necessity to clarify government policies revolving around the controversial Comprehensive Agrarian Reform Program (CARP). The question on whether to extend the program after its 20-year legal implementation in 2007 should be studied carefully, given the lessons of the last 20 years.

• Technical support
In order to facilitate financing opportunities and project support to local government units for their agricultural projects, it is critical to assign more personnel with technical, legal, and financial skills in the field.

• Peace and security
Cutting across all issues is the peace and security factor, particularly in the food basket, Mindanao. To promote peace and stabilize security in critical areas, a national fund for conflict-prone areas was created. In addition, the LGUs were given a greater role to ensure, achieve, and maintain local peace in their areas of authority and responsibility.

… BOLDER PLANS

The government has introduced yet another plan to address the sector’s issues through the implementation of its five-point agenda to improve agricultural productivity. This program covers improvements in irrigation, credit restructuring, easier access to foreign and domestic market, post-harvest and storage systems, as well as improvement in research and development, education, and extension services.

Specific plans have been identified as part of the grand agenda. These focus on injecting huge amounts of investment to agriculture to counter the effects of 2006’s super typhoons, ensuring that the country remains free from avian flu and other outbreaks, and in controlling production and logistical costs.

GMA RICE AND CORN PROGRAM

Paddy rice production is expected to grow by almost 6% to 16.23 million metric tons in 2007. This can be achieved through the GMA Rice Program as well as the utilization of certified and hybrid seeds, which would ensure that rice production will grow by an average of 3.34% a year. The DA has allocated P400 million this year for such program, which will go on for the next three years.

In improving infrastructure, DA has allotted P3.13 billion for the rehabilitation, repair and restoration of irrigation systems covering 75,000 hectares of farmlands to ensure the achievement of its rice self-sufficiency goal.

As of the first quarter 2007, the government has released P581.5 million for the corn production program. The department is expecting corn self-sufficiency level to be 94.2% in 2007, and to reach 100% in 2008 and 2009. Output is expected to rise by 8.4% to 7.5 million mt in 2008, from this year’s target of 6.9 million MT.

NATIONAL GRAINS HIGHWAY

The proposed grains highway shall directly link rice and corn production areas to major consumption centers and areas of the country that are isolated and prone to natural calamities. It will be constructed alongside the investment on much needed post harvest facilities and equipment that will potentially reduce the post-harvest losses from 25% to even 1-2%.

The facilities shall be set up in the 37 rice producing and 33 corn producing provinces. The development of the P2-billion grains highway is expected to reduce post harvest production losses which are currently at 14.8% for rice.

SECURITY CHECK

The poultry industry is expected to produce 1.24 million metric tons in 2007 from the 1.21 million metric tons recorded in 2006 through the continued strategic disease control, surveillance, quarantine, and a sustained information and education campaign as protection from avian flu. Furthermore, the government is focused on strengthening Mindanao’s hog industry for world pork market penetration.

CONTROLLING HIGH PRODUCTION COST

One of the challenges of Philippine agriculture is the reported high production and logistics cost hounding the vegetable farmers. Producers have complained of high cost of transport and handling, production inputs and even packaging materials, over and above the major concerns of unstable pricing, post-harvest losses, and the lack of friendly financing packages for farmers.

LOOKING FORWARD

Overall, 2006 was a good year for the farming sector. Its resiliency contributed to the rosy picture of the Philippine economy in 2006, accounting to one-fifth of the country’s total output. For the next three years, the sector is expected to perform much better, banking on the equal expectation for infrastructure plans to push through, for the proposed post-harvest facilities to be delivered, and for support system, particularly to food exporters affected by the peso appreciation, to be established.

Of course, there is still the threat of natural disasters and typhoons. However, as learned in the 2006 experience, making the most out of good seasons, as well as extending post-typhoon assistance for swift farm recovery, is the key to hitting a good production level – and possibly, even reaching the 5-6% growth target for 2007.