Sinag’s agricultural economics

THE head of the Samahang Industriya ng Agrikultura (Sinag), Rosendo So, claimed on national television and print media that the rising prices of food commodities can be attributed to the high cost of fertilizer and fuel. At face value, his explanation is so commonsensical. Indeed, prices of fertilizer have doubled and petrol prices remained exorbitant despite their weekly roller-coaster price changes that eventually end up registering higher figures in petrol stations.

True that the doubling of fertilizer prices has resulted in the insufficient fertilizer application of our farmers, leading to lower farm productivity. On the other hand, higher fuel prices jack up the cost of transporting agricultural products from the farm to the market. With lower harvest and the high cost of transporting them, food prices will therefore increase.

A philosopher once declared, “The purpose of science is to liberate us from the tyranny of common sense.” Let us apply some logic and then vet So’s statement using the prism of science.

First, using logic, it is obvious that with this line of argument, So’s intention is to serve as an apologist of the current Department of Agriculture (DA) leadership. If high fertilizer and fuel prices are the causes of the soaring food prices, then there is nobody to blame because rising fertilizer and fuel costs are mainly driven by external factors. I am referring to the Ukraine-Russia conflict which led to the United States and its allies imposing an embargo on Russian oil exports. As Russia’s oil export represents nearly 20 percent

of the total world oil supply and fertilizer is derived from petrol products, oil and fertilizer prices expectedly skyrocketed. Hence, using So’s logic, the DA is not to be blamed for factors that are fueling higher food prices because they are beyond its control.

The same kind of staunch defense was made by So in the case of the rising prices of sugar. Remember that when sugar prices started rising in the third quarter of this year, he assured the public it was a temporary phenomenon. He first noted that since September was the beginning of the sugar harvest season, sugar prices would soon stabilize. It did not. Later, he claimed that when sugar imports approved by the President start arriving in November, the price of refined sugar will settle to around P70 per kilo (it was P52 prior to the increases). Again, his prognosis was proven resoundingly wrong as the price of refined sugar hovers around P90 per kilo this month. Curiously, So never blamed DA for it unlike during the department’s leadership of William Dar when he attributed almost all the problems hounding the sector as being caused by the Agriculture department.

No science at all

And applying science by examining data on food supply and demand, So’s argument ignores the fact that we have shortfalls, some of them serious, in the local supply (production) of food commodities even before the outbreak of the Ukraine-Russia conflict and the Covid-19 pandemic.

Circa 2018, the Philippine Statistics Authority (PSA) handbook of food sufficiency in the country, already revealed that local production can only meet up to a certain portion of our demand (figures were rounded off): rice, 86 percent of our demand; coffee, 29 percent; onion, 62 percent; pork, 86 percent; chicken, 94 percent; tilapia, 99 percent; garlic, 9 percent; beef, 61 percent, among others.

Applying the law of supply and demand (i.e., the price of a good goes down when abundant and rises when there is scarcity) in economics, rising food prices mainly occurs as a result of supply shortages. And that shortages were already in existence prior to the outbreak of the UkraineRussia conflict or even before the Covid-19 pandemic. In other words, the root cause of rising food prices is the existence of shortages and they were made worse by those two factors.

The serious food supply shortfall pushing upward our inflation rate was gingerly recognized by the Bangko Sentral Pilipinas (BSP) in its November statement on how our rising inflation rate (7.7 percent in October this year) can be tamed. It reminded the other agencies of the government, “The BSP continues to strongly urge the timely implementation of non-monetary government interventions to mitigate the impact of persistent supply side pressures on inflation.” This is a more forthright statement in contrast to its October pronouncement on inflation that “reiterated its support for the national government’s efforts to improve farm productivity and address supply bottlenecks.”

In other words, the BSP is saying that soaring food prices, due to supply shortages, is triggering high food inflation and overall inflation rate. Food inflation contributed 45 percent, almost half, to the October 7.7 inflation figure.

PAPs and the ASF

In a radio interview morning of Nov. 11, 2022, So accused former DA undersecretary Leocadio Sebastian of causing the renewed outbreak of the African swine fever (ASF) in Iloilo and Ilocos Norte due to his memorandum (memo) request dated July 14, 2022, and approved by the President, to allow importation of processed animal proteins (PAPs) for use by the local aquaculture industry. Importation of PAPs was previously banned by Dar in a memo dated Jan. 31, 2022.

Legally, the July 14 memo will not be in effect until its publication in the government official gazette. Note that the memo was eventually published not under the term of Sebastian as caretaker of the DA but under his successor, Senior Undersecretary Domingo Panganiban.

Let me further dwell on the infirmities of So’s accusation.

The approved July memo specifically requested the President “to allow importation of PAPs from ASF-affected countries provided that risk management measures are implemented.” Additionally, the memo stipulated that Bureau of Animal Industry should “issue a memorandum circular prescribing the guidelines on the importation of PAPs from ASF-affected countries.” In support of the second stipulation in the memo, Panganiban issued Special Order 788, signed on Oct. 5, 2022, creating a technical working group (TWG) to formulate the guidelines on PAP importations.

If the July 14 memo is questionable, the question is why did Panganiban still form the TWG? And who caused the official publication of that same memo when if we believe So, that it would pose a danger to our hog industry?

It is most likely that PAP imports intended for the country have not arrived because of bureaucratic delays in the crafting of guidelines. Then, why does So blame Sebastian for the outbreak of ASF as a result of PAP importation that have not arrived? Moreover, the fact that it was under Panganiban that the TWG was formed and when the July 14 memo was officially published, why is So blaming Sebastian for an “omission” committed by his successor?

Also note that there was already an ASF outbreak in the Ilocos Region prior to the installation of President Ferdinand “Bongbong” Marcos Jr. So must have missed this fact.

Rice supply

My detractors are gloating over the fact that we are not experiencing any rice shortage, contrary to my prediction that we will have one if the announced “no importation” rice policy for the fourth quarter of this year by the DA leadership is observed. Well, the instruction was never followed. Rice imports continued to pour in even during the peak

palay (unmilled) harvest months of October and November. Based on government official data, there were more than 3.2 million metric tons (MT) of imported rice that entered the country as of end-October 2022. This is higher by a million MT compared to rice import arrivals for the first 10 months last year. This is the main reason why palay prices are down to P13 to P15 per kilo.

I am wondering why the Federation of Free Farmers (FFF), led by Raul Montemayor, is now awfully quiet about these developments. If these happened during the DA leadership of Dar, FFF and the rest of its allies would have gone around media outfits crucifying the DA, naming it the “Department of Agricultural Importation.”

What ever happened to these “champions” of our tillers?