AGRICULTURE remains an Achilles heel of the Philippine economy based on last week’s report of the Philippine Statistics Authority (PSA) on the July inflation rate in the country and the performance of the agricultural sector during the second quarter of the year.
The PSA said that the inflation rate rose from 3.7 percent in June to 4.4 percent in July, overshooting the government’s target of an average inflation rate of between 2 and 4 percent for this year. As of the first half of this year, the average inflation rate remains within the government’s target of 3.5 percent.
In addition, PSA also reported that while agricultural production fell by 2.3 percent during the second quarter, all other economic sectors grew. But the country still logged in a robust gross domestic product (GDP) growth rate at 6.3 percent for the second quarter, no thanks to agriculture.
The main contributor to the higher inflation rate last month was food inflation that was registered at 6.7 percent in July compared to 6.5 percent in June. Of the food items, cereals registered the highest inflation rate at 74.7 percent, meat and other parts of slaughtered animals at 12 percent, and vegetables and others at 6.6 percent.
Among the cereal items, rice significantly contributed to the higher food inflation at 20.9 percent. But this is actually lower than the June figure of 22.5 percent.
The adverse impact of higher food inflation is felt more by Filipinos who belong to the bottom 30 percent of the income quintile. While the monthly average inflation for the country in July was pegged at 4.4 percent, the poorest of the poor experienced a higher inflation rate of 5.8 percent.
The simple explanation to this is that the poor spent most of their income purchasing food in order to survive. Studies show that they devote an average of 60 percent or higher of their total income to food items.
In other words, the poor can hardly afford to spend on other basic necessities of a decent living existence such as health, housing and education as their income is too small. They expectedly spend most of their income on food, which is indispensable for their biological survival.
Hunger stalks the poor’s daily life. The Social Weather Stations (SWS) reported that the incidence of hunger is rising alarmingly in the country.
It observed that “Hunger rises to 17.6 percent in June 2024 from 14.2 percent in March 2024. Hunger rises to 14.2 percent in March 2024 from 12.6 percent in December 2023. (And) Hunger rises from 9.8 percent in September to 12.6 percent in December 2023.”
Undeniably, rising food prices directly correlates with hunger. In turn, hunger is correlated to the problem of high malnutrition and stunting incidences among the Filipinos, particularly kids.
Furthermore, malnutrition and stunting among our kids contribute to their cognitive impairment considering that 90 percent of a person’s brain is developed during the formative years of 0-5 years old. Given that more than half of the Filipinos considered themselves poor, as per SWS self-rated poverty survey reveals, this means that more than 50 percent of Filipino kids coming from the poor family are at risk of suffering from cognitive disability.
This is partly validated by the embarrassingly poor performance of Filipino students in internationally administered tests to measure cognitive ability of children of school age. This has led to the World Bank to note that our country suffers from “learning poverty.”
High food prices undoubtedly aggravate the poverty problem in the country. It can be alleviated if local food production is sufficient or more than able to meet local demand. Unfortunately, across the board, based on the PSA data on the sufficiency of local production of various agricultural commodities, we are in short supply in almost all of them at varying degrees.
Key commodities like corn for instance, critical as feed ingredients for livestock, poultry and aquaculture, local production can only meet 57 to 60 percent of total demand. For rice, local supply can meet around 80 percent of total demand. Same for pork, poultry, vegetables and fishery products where their supplies fall far short of their demand.
Ostensibly, the solution is either we ramp up local production or import these commodities. We are unfortunately not performing well on the former.
For instance, PSA reported last week that the value of crops and livestock production contracted by 3.3 percent in the second quarter of this year. The production of palay (unmilled rice) fell 9.5 percent year on year, while corn output declined by 20.3 percent during the same period.
The lackadaisical performance of the agricultural sector during the first half of this year is being attributed to the El Niño phenomenon that hit the country. But what is not mentioned is that the budget of the Department of Agriculture (DA) almost doubled this year compared to the previous year. One wonders therefore what measures had been adopted by the agency to mitigate the ill-effects of El Niño, which was already predicted to occur as early as late last year.
Similarly, the handling of our rice supply and demand situation leaves much room for improvement. Last year, the DA supported the imposition of the price ceiling in order to tame rice inflation. The move did not yield positive results as rice prices continued to soar.
Rice traders were blamed for colluding to maintain high prices by not releasing their stocks. The DA predicted that rice prices would start to fall during the dry harvest months of February and March. Unfortunately, this did not happen as prices remain elevated.
There was massive arrival of rice imports during the first half of the year which totaled to a staggering amount of more than 2.1 million metric tons. Yet, rice prices remain high.
In response, President Ferdinand Marcos Jr. issued Executive Order 62 reducing the tariff on rice from 35 to 15 percent in order to tame rice inflation. In recent months, world rice prices declined by around 3 to 7 percent from a high of almost $600 per metric ton (MT) of 5-percent Vietnam broken rice to less than $550 per MT.
The twin effects of reduced tariff and declining global rice prices should have benefited Filipino consumers with lower rice prices. But data shows that only 56,000 MT of rice imports arrived as of July 20, compared to the usual monthly average of 400,000 MT from January to June this year.
In the private sector, when a certain unit in the organization does not meet expected performance from the management, a reorganization usually occurs. The best people are appointed and adequate resources are provided based on a plan for recovery and sustained growth.
We have reached a crisis-like proportion in our agricultural sector because it is becoming a drag to our higher and rapid economic growth while at the same time exacerbating the problem of malnutrition and stunting among our people due to soaring food prices.
It is indeed tragic that the government has not properly and boldly responded to the challenges facing our backward agricultural sector despite the fact that its performance has been declining for more than two decades now.
It is about time government assembles the best minds in agriculture and related disciplines to point to us what should be done to reverse the fortune of Philippine agriculture.
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