Solving PHL’S fertilizer crisis
Despite efforts of past governments to encourage farmers to consider planting other crops, most of them continue to favor rice production. Millions of Filipino planters rely on the staple for their source of income. Many of these planters are usually smallholders, who do not have the capability to purchase expensive inputs.
The recent agricultural production data released by the Philippine Statistics Authority (PSA) point to the challenges confronting rice planters. Chief among these concerns is the high cost of fertilizer, which has tripled after Russia attacked Ukraine in February. The report released by the PSA on Monday indicated that rice production in the first half contracted by 0.63 percent to 8.743 million metric tons, from last year’s 8.799 MMT (See, “Crops, fisheries pull down H1 farm output value,” in the Businessmirror, August 8, 2022).
Sans assistance from the national government in the form of fertilizer subsidy distributed during the wet planting season last year, the figure may have been lower based on PSA data. In the first quarter of 2022, the sector produced 4.541 MMT of unmilled rice, nearly 2 percent lower than the 4.626 MMT recorded a year ago. In the second quarter, output improved by 0.7 percent to 4.202 MMT, from last year’s 4.172 MMT.
Fertilizer prices have been going up even before the conflict in Eastern Europe, and this was largely because of the supply chain disruptions caused by the pandemic. The spike in natural gas prices, sanctions and restrictions imposed by exporting countries and transport problems caused imported chemical fertilizers to become more expensive last year. The Russia-ukraine war worsened the fertilizer supply issues and caused food prices to further accelerate.
Countries that depend on imported fertilizers have no choice but to bite the bullet and pay through the nose to support local food production. Unfortunately, there is no relief in sight for soaring fertilizer prices. Big companies producing chemical fertilizers like Yara earlier warned that the continuous spike in natural gas prices would force them to cut output this year.
Lower output by exporting countries would mean more expensive fertilizer for importers like the Philippines. The chairman of the House Committee on Ways and Means has suggested measures that could ease the pressure on local fertilizer prices. One of Albay Rep. Joey Salceda’s recommendations is to cut to zero the tariff on fertilizers and farm equipment (See, “House leader pitches tariff cuts on fertilizers, farm gear,” in the Businessmirror, August 4, 2022).
While zero tariffs could dent revenue collection for the year, the loss could be offset by the benefits that would be enjoyed by local farmers and even consumers. For one, an increase in the output of staples like rice and corn would reduce the need for importing these commodities and insulate the country from the price pressures arising from transport logjams. Stable prices of inputs would also allow planters to earn and save enough capital, which they can use for the next cropping season.