Challenges for Philippine Food and Agriculture : A Year-End Food and Agri Business Conference (Part 2)
Challenges and prospects for 2008 Commodity Highlights
Palay. Growth will continue to be moderate with the increased adoption of modern productivity technologies promoted through the GMA Rice Program as area harvested will basically stay the same. The higher budget for rice production will also be a plus factor for the sector’s growth. The PAGASA’s forecast indicates the start of a weak to strong La Nina which will likely last until early April of 2008. This can be good for production depending on its severity. A number of international agencies have indicated that there may be tight supply in 2008 with increased trade due to strong consumption. Rising demand and tight supply will keep world rice prices high.
Corn. The crop will continue to post good growth although not as robust as the past two years. Good prices are expected to continue to prevail which will encourage increased plantings. The availability and expanded adoption of hybrid and GM seeds including Bt corn will enhance productivity. The creation of a national standard for corn quality and good agricultural practices will promote competitiveness in the industry.
Coconut. Some recovery will be seen in coconut production after two years of flat to negative growth. This will likely come in the second half as trees take one and a half to two years to normalize. The extent of recovery may be slightly affected if the Brontispa longgisima infestation will not be eradicated or at least contained within 2007 as assured by government coconut officials. The sustainable funding for rehabilitation and fertilization programs as well as intercropping initiatives will be a good boost to the industry. However, fund commitments remain small.
Sugarcane. Growth is expected to increase by 4.5 - 5.5% in 2008 coming from an output decline in 2007. Growth will come from the continuous crop shifting to sugarcane, use of high yielding varieties and adequate irrigation in some areas.
Banana. The industry is projected to sustain its growth in 2008. Area expansions especially for the Cavendish variety in Mindanao may be stymied by weak farm margins due to the peso appreciation.
Other crops. Growth is seen to slow down to 2% to 3% in 2008 due to a foreseen weather disturbance, the La Nina, in the first half of the year. The La Nina rains are seen to have adverse effects on such crops as mango, rootcrops, among others.
Livestock. Output is projected to increase at 2- 3% in 2008. The biggest contribution will still come from hog. The growth is due to increasing demand brought about by the growing population. By contrast, cattle can still be in a downtrend.
Poultry. The sector will grow by 4% in the first half and further by 5% in the second half due to strong demand during the holidays. However, integrators are conservative on output growth due to high input costs (i.e. corn, vaccines) and entry of imported chicken in the country. A broiler projection model forecasts a 20% increase in 2008 that will likely cause poultry prices to be weak unless there are cutbacks.
Fishery. Production is expected to grow at 6 - 7% in 2008. Aquaculture will remain as the main contributor. Favorable weather conditions will sustain growth in commercial and municipal fishing as well as in aquaculture.
Forestry. The 2008 growth is estimated at 0-10%. The production of natural grown and plantation species will continue to improve the sub-sector’s performance.
CONCLUSIONS
The year 2007 is a relatively good year for Philippine agriculture, with sustained growth of 3.5% to 4.5%. In 2006, the sector managed to grow by 3.8%. The growth boosters in 2007 included corn, banana and fishery.
For 2008, growth is seen to accelerate to 4.0% to 5.0%. The strong performers will include coconut, banana, poultry and fishery. However, there will be key changes and challenges for the sector from the global and local fronts.
Tariffs. In the global arena, pushing forward to 2010, tariffs for most commodities will go down to just about 5% under the ASEAN Free Trade Area. Building or sustaining competitiveness will thus become all the more important, not just in cost, but also in terms of quality and supply reliability. This is true not just for agricultural products intended for the local market, which will have to face increasingly tougher competition from imported ones, but also for the country’s exports.
In addition to tariffs, there are also non-tariff barriers in global markets which are a cause of concern for countries like the Philippines. An example is the stringent requirements of Japan, a major market for many Philippine agricultural products, ranging from food safety, HACCP, maximum residue limits, traceability, among others.
Similarly strict standards are also enforced in the country’s other big markets like the US and the EU.
Energy costs. Rising energy costs will continue to exert pressure on energy users, e.g. food processing companies, transport companies, and the like. At the same time, the situation will present opportunities for bio-fuels - ethanol and biodiesel. For the Philippines, the fuel vs. food/feed issue will remain especially for biofuel crops like corn and sugar. Another concern is how fast the Philippines will follow suit considering the rising global demand for biofuels. Talk about crops like jatropha, sweet sorghum, cassava, coconut, palm oil for biodiesel. In the long term, this will have implications on land use.
Commodity imports. Global commodity prices are up such as for wheat, rice, fertilizer, corn, among others. The implications for the Philippine agriculture are varied. For instance, for rice and fertilizer, the impact will generally be negative in that the increase in global prices will translate to higher cost of imports.
For wheat, on the other hand, the effects may differ. On one side, the hike in prices will discourage feedmillers from substituting wheat for corn. In effect, it will encourage patronage of local corn. On the other side, wheat use especially for flour milling will be affected negatively. High wheat prices will mean higher costs of such products as noodles, bread, pastries and other bakery products. Meanwhile, high corn prices may have a positive impact in that it will discourage importation.
Peso appreciation. At the local scene, the appreciating peso also poses a challenge. It makes imports cheaper but penalizes exports. For agriculture which is highly dependent on imported inputs like fertilizers, chemicals and to some extent, farm machinery, the peso appreciation may somehow stymie rising global commodity prices.
On the end, it also makes importation all the more attractive to the detriment of the local producers. In terms of exports, the products become less profitable as a result of a stronger peso. In fact, several food processing companies have already scaled down operations due to the peso appreciation.
Climate change. Another concern is global climate change which will have serious implications on agriculture as well as other industries in general, not just for the Philippines. Aside from contributing to increases in commodity prices due to the occurrences of droughts, floods, hurricanes, among others, scientists have warned that it will eventually lead to water scarcity and hunger.
Further, the increasing greenhouse gas emissions into the atmosphere are reportedly beginning to make the world’s oceans more acidic, which disrupt certain life forms necessary to maintain the ecological balance.
Fishing access. Gaining fishing access in foreign waters is also a global challenge. In the case of the Philippines, fish resources mainly tuna, a major export, have substantially gone down in domestic waters. Thus, it has become more and more pressing for the country to forge bilateral fishing agreements with possible source countries. There are on-going negotiations with Palau and Papua New Guinea.
Politics. The political situation in the country is also a major hurdle. For instance, the recent incidents in Makati (e.g. bombing, Manila Pen takeover), the country’s central business district, dampen investor confidence.
Studies have shown that private investment is a major driver of job creation and economic development. In agriculture, this can be seen in the country’s export winners - banana, pineapple, seaweeds, tuna, and coconut oil - which are mainly private-sector led.
Weather. With less than a month remaining, the country has, thus far, skirted the strong typhoons. But after having come from a relatively dry season, it is expected that the coming months will be relatively wet and likely experience higher frequency of typhoons. This may have differing impacts on agricultural crops.
INDEED, THERE ARE MANY challenges for Philippine agriculture in 2008 and beyond. And there will always be. But as the saying goes, “challenges are what make life interesting; overcoming them is what makes life meaningful.” Hopefully, we can make Philippine agriculture rise up to the challenges through our concerted efforts and then, our lives will be more meaningful.
Part 1 –> Challenges for Philippine Food and Agriculture : A Year-End Food and Agri Business Conference (Part 1)
