Our rice problem has two dimensions: 1) how to raise income of farmers, and 2) making rice affordable to consumers. Flooding the market with cheap imported rice will address the problem of affordable rice to consumers. However, it exacerbates the problem of low income among the producers. It should not come as a surprise that soon rice farmers will be up in arms in Quezon Circle seeking redress.
In previous columns, I wrote about the many measures needed to be taken to raise the income of rice farmers. Basically, the idea is 1) to further intensify rice cultivation in favorable rice growing areas i.e. those with irrigation, and 2) to divert the less favorable areas i.e. rainfed lowlands and uplands into other higher valued crops.
Both approaches are technically very feasible but require a lot of resources and time. The impending lifting of quantitative restrictions on the import of cheap rice will bring immediate relief to rice consumers. In the meantime, the rice farmers will unjustly bear the full burden of adjustment to market liberalization.
Price support and input subsidies which are the common ways of helping farmers have not really worked for us. We have been doing these all these years with very little to show for all the money we have spent.
Hence, our proposal to explore the alternative of direct payments to bonafide rice farmers based on area farmed as indicated in land titles and tax declarations. With this approach most, if not all, the subsidies will accrue to the intended beneficiaries. The payments will be good for a period of ten years which should be more than sufficient time for rice farmers in the transition. The payments can be sourced from the 35% tariffs on imported rice.
Mechanization, an immediate
For those who will continue rice farming there is an immediate game changer available to raise their incomes — full mechanization.
The latest figures from the Philippine Rice Research Institute (PhilRice) show that the landed price of 25% broken rice is US$484 per ton, which at the prevailing peso-dollar exchange rate of P54.00:US$1.00 amounts to P26,136 per ton. With 35% tariff, freight, insurance and other costs, the import parity price of rice at wholesale is around P37,000 per ton or P37 per kilogram.
To match the price of imported rice, the palay farm gate price should be at most half i.e. P18.50 per kilogram. Thus, as an immediate response, instead of the current buying price of P17 per kilogram palay, NFA should now raise its support price accordingly. P22 per kilogram as proposed by some quarters is necessary and inflationary.
The less inflationary and less costly way to maximize the income of farmers is to bring down the cost of producing palay as low as possible versus the new P18.50 per kilogram benchmark. As reported by PhilRice, the costs of producing palay are P12.41, P8.85 and P6.53 per kilogram respectively for the Philippines, Thailand, and Vietnam. Our fertilizer, irrigation, land rental and credit costs are a little higher than our two competitors and we should take steps to bring them down but the biggest disparity is in the cost of hired labor which are P3.76, P0.66 and P0.46 per kilogram, respectively for the Philippines, Thailand, and Vietnam. The Thai and Vietnamese rice farms are heavily mechanized and their need for extra hired labor is minimal.
Except for some areas where they still use carabaos to prepare the land, most of our rice farmers now use two-wheel tractors for plowing. The P3.00 per kilogram difference is due to the manual costs of transplanting, harvesting and threshing. The costs of transplanting can be substantially reduced by 1) direct seeding, or 2) by use of tractor-mounted transplanters. Instead of manual harvesting and threshing, both operations can be accomplished more efficiently with the use of grain combines.
The agronomic measures to raise productivity will take time. On the other hand, the cost-saving impact of mechanization is immediate. In fact, the more progressive among our rice farmers are now benefitting from their use.
However, very few farmers have the means to acquire tractors, mechanical transplanters, combines and dryers. Besides because of their small landholdings it is not practical for them to invest in machines which they will use for only a few days in the entire year.
Farm machines not only reduce cost of labor but also improve timeliness of operations and raise quality of farm produce. Over the years we have been distributing free farm machines to cooperatives and farmers associations for their common use. Unfortunately, for the most part this has not worked as the machines soon break down and nobody assumes responsibility for their maintenance.
But even now there are some enterprising farmers who have purchased small tractors, threshers, and dryers for their own use but also provide service to their neighbors for a fee.
Therefore, the more cost-effective, sustainable solution to rice mechanization is empowering enterprising farmers in all the rice growing areas to become farm service providers to their neighbors. All these entrepreneurs will need is training on machine operations and maintenance. With a bank guarantee under the Agriculture Guarantee Loan Fund, the farmers so-trained can obtain loans with which to purchase the machines.
For the larger, more expensive machines like the tractor-mounted transplanters and grain combines, the big operators in Isabela, Nueva Ecija and elsewhere are leading the way. Since they are commercially bankable they should be on their own.
Dr. Emil Q. Javier is a Member of the National Academy of Science and Technology (NAST) and also Chair of the Coalition for Agriculture Modernization in the Philippines (CAMP).
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