Posts Tagged ‘“Effectiveness of Public Spending: Case of Rice Subsidies in the Philippines”’

Agriculture:Help Needed by Rice Farmers

September 22, 2009

Help Needed by Rice Farmers

They may be the farmers nearest the government’s Agriculture office in Quezon City.

Still, rice farmers in Bulacan are not the most endowed of all farmers in the country.

They suffer from the lack of basic post harvest facilities like dryers and storage, inconsistent harvest incentive system, inadequate seed subsidy, unsystematic rice pricing policy, and reducing income due to excessive rice imports.

“Yung di agad nabilad, umiitim (the rough rice that misses immediate drying darkens and gets spoiled),” remarked Felix R. Villena Jr., chairman of Bulacan farmers’ cooperative UMASA KA (Ugnayang Magsasaka Sa Kaunlaran).

Farmers at UMASA KA try to get much of their rice harvest milled at the National Food Authority’s (NFA) mills. However, to get a better price of P17.72 per kilo, they have to get the grains dried well first at 14 % moisture content.

But where in the first place will farmers get the driers to deliver better grains if they don’t have the money yet to pay for mechanical dryers? Good if it it’s always summer. The worst comes when rains fall, and the concrete roads where they dry the grains get flooded.

To get a cavan of rough rice (palay) dried at government’s facilities, Bulacan farmers have to pay P28 per kilo. But aside from the absence of money, the other problem is farmers are even the ones that have to buy the fuel to run the dryers, although they are repaid for it upon drying.

Every 20 liters of fuel costs P1,500. They have to pay for three pails or P4,500 per 100 cavans of palay. For a white collar worker, this cost may be small. But to the farmer, this amount is big enough to compel them to borrow at usurious terms.

“Ayaw sana naming kumuha ng five-six sa Bumbay, pero minsan di maiwasan (We don’t want to borrow from high interest-charging loansharks. But we can’t always avoid getting it),” said Villena.

Another farmer, Valentin Mempin, 72, has gone old seeing his rice harvest get worse each passing day from the time of harvest.

He tends a hectare of irrigated farm and two hectares of rainfed farms that he got from the Comprehensive Agrarian Reform Program (CARP).

“We just dry on the concrete road. When we don’t get this dried at once, quality drops. About 20 % is lost in 5 to 10 days.

One option for them during the rainy days is to sell the produce at once to traders, according to Ceferino Sioson, 52. Sioson gives in to selling the un-dried rice with a moisture content of 26% at P11 per kilo. That is much lower than the P17 per kilo support price offered by NFA.

Indeed, NFA’s support price may even be higher than traders’ price which is at P14 to P15 per kilo. But farmers have to toil and spend fuel in bringing palay to NFA’s warehouse which is more or less 13 kilometers away from their place.

When harvest floods during the country’s peak harvest in October-November, the worst, rather than the best, time may be up for these farmers. These times, the lack of facilities cause more tons of rice to go to waste.

According to the Department of Agriculture (DA), it has installed 565 flatbed dryers in the third quarter of 2008 as part of a comprehensive plan.

DA Rice Program Director M. Malabanan said DA also constructed 33 multipurpose drying pavements in irrigated areas.

DA is supposed to have put as top priority post harvest facilities under its FIELDS program (Fertilizer, Irrigation and other Infrastructure, Extension, research and development, Loans and insurance, Dryers and other postharvest facilities, and high-quality Seeds).

But the program is apparently insufficient to meet farmers’ needs. And if farmers near the city like these Bulacan farmers can hardly feel the benefit of government support, how much more would farmers in farflung islands feel abandoned?

Luckily, for a more well-off farmer who lives in his own house, Leocardo de Rueda, 76, can afford to dry his own rice right at his own wide house.

He does a continuous drying of his grains, 24 hours a day even at nighttime. This he does by putting the grains in front of the electric fan continuously over three days when it’s raining just to ensure the rice does not decay.

“If you wait for your schedule of drying, you’ll lose your harvest,” de Rueda said.

Dr. Frisco M. Malabanan, DA rice program Director said DA has a P1.5 billion budget in 2009 for flatbed dryers or biomass furnaces for drying rice that use rice husks for fuel. A separate P500 million has been approved for flatbed dryers under the president’s budget.

These dryers are already allocated for identified priority areas.

“We have priorities up to 2010. But that doesn’t mean they (Bulacan farmers) cannot avail of the program. They can request for it with DA’s RFU (Regional Field Unit) Region 3,” Malabanan said.

Another problem of these farmers that people who have enough money on their hand fail to see is that farmers need immediate cash.

But government pays check even for small amount of money whose encashment takes more time for farmers.

Farmers even have to take a transportation, pay a fare of P300, to the Bulacan provincial office where they can claim the check payment for their rice. This should be made easier for farmers by paying them in cash right at the facilities’ site.

“Ayaw daw nilang i-cash kasi baka ma-holdup raw (they don’t want to pay in cash because the handler may suffer a holdup,” said Simeon T. Sioson, another Bulacan farmer.

Payment Delay is also a problem.

For Villena relates that, government’s payment for more than a P1 million payable to Umasa Ka farmers at one time has dragged for two or more weeks. This is a long waiting time for cash-scarce farmers.

One positive thing that government is doing, according to these farmers, is the NFA’s purchase of their rice at a support price of P17 per kilo.

In December, at the peak of the harvest, this high price was a lot of help to farmers as traders and millers were offering only P14 per kilo.

Unfortunately, NFA’s purchase of farmers’ rice only accounts for five percent of the country’s rice production. This may involve a big P13.6 billion.

However, these farmers believe government should buy the entire rice production of 16.24 million metric tons (MT) as of 2008.

At P17 per kilo, that should amount to P276 billion. Huge this cost may appear, the amount already pays for the entire Philippine rice production which is already around 90 % of local demand.

On the other hand, the government paid last year an estimated P103 billion for rice imports. This is just for 2.3 million MT or only 12.4 %t of what was supposed to be made available in 2008 (16.24 million MT plus 2.3 million MT).

With the country’s huge import volume, farmers from Vietnam or Thailand , rather than Filipino farmers, had benefited from selling their rice at the height of the rice crisis last year.

Rice farmers have always opposed government’s excessive rice importation. The rice warehouse as of December 2008 was deluged with rice stocks imported from Vietnam, Korea, and the US.

And the stocks stay there for almost one year, gathering dusts and pests.

To retain good quality of the rice stocks, storage should be temperature-controlled. Without air conditioning, stocking may only be advisable for six months, or pests swarm the rice as much as those in the Bulacan warehouse.

“They just need to be sprayed with pesticide, and they’re fit for consumption again,” said an NFA Bulacan warehouse official.

But pesticide spraying obviously involves another cost for government aside from its unknown health and taste cost.

Government’s unsystematic rice subsidy for farmers is also making life difficult for farmers.

In one case, NFA bought Vietnam or Thai rice at P1,750 per bag or at an expensive P35 per kilo, a farmer alleges.

But much more to farmers’ dismay, government traded these imported rice at a loss, selling it at only P1,175 per bag or P23.50 per kilo, albeit for the benefit of poor communities.

This creates a distortion in the market and pulls down the price at which farmers can sell their rice to millers and traders who buy what government cannot buy from them. NFA has a separate subsidy program for the poor where rice is sold at P18.25 per kilo.

“The government should not compete with farmers,” according to Sioson.

An Asian Development Bank (ADB) study indicated that while government’s support to poor communities benefits the poor during a rice crisis, government should be systematic in distributing subsidized rice. This is to ensure that cheap rice goes to the real beneficiaries rather than to higher-income families who happen to have greater geographic access to subsidized rice.

ADB indicated that government actually lost P167 billion or 2.5 percent of gross domestic product (GPD) from the rice subsidy program. This is based on the difference between actual rice costs (local procurement and import cost, administrative, and other operating costs) and revenue from subsidized sales.

That is without necessarily benefiting the targeted poor.

“Significant exclusion of the poor and leakage to the non-poor reduce its targeting effectiveness,” said Shikha Jha and Aashish Mehta in the “Effectiveness of Public Spending: Case of Rice Subsidies in the Philippines .”

“For those who do not use the program, non-participation appears to be involuntary, arising from physical limitations. Those buying NFA rice in cities buy more than their rural counterparts. The program does not act as a safety net against unemployment.”

However, Malabanan, said the impact of subsidized rice on the commercial rice price must be very minimal.

“I don’t think it really affects price,” he said.

To further guarantee that the subsidized rice only goes to the certified poor, DA has tied up with the Department of Social Welfare and Development (DSWD) which issues Family Access Card to legitimately poor beneficiaries.

“The DSWD has a strict screening process,” he said.

A government intervention that farmers appreciated is the fertilizer subsidy which they can use for their fertilizer purchase. This amounts to P1,800 paid for every 50-kilo bag of palay delivery. This helped them specially at a time when fertilizer price was at a high of close to P2,000 per bag.

DA claims to have released P293 million for this fertilizer incentive over five months in 2008.

However, farmers fear of DA’s removing this subsidy with DA’s announcement that it will channel more funds for heavy infrastructure like roads since subsidies like these have been rocked by corruption charges.

Another useful help farmers look for is insurance for crops. To them, this is important specially as the Philippines is in a disaster-prone region.

Once they lose their harvest to a typhoon, they lose everything—the anticipated income and the capital for purchasing inputs like seeds and fertilizer for the subsequent planting.

At one time in Filipino rice farmers’s history, during former President Corazon Aquino’s time—1986 to 1992, crop insurance benefited them, recalled one of the farmers.

But no insurance benefit for farmers has ever been heard of since that time.

Malabanan said he personally believes in giving insurance to farmers. This, he said, will likely raise rice production as more farmers will take a risk in planting because of the guarantee.

“I’m fully supportive of this. There’s simply just no government allocation yet,” he said.

DA, in fact, gave an insurance coverage as incentive to farmers growing rice under the Quick Turn Around (QTA), an extra planting program on top of the usual dry and wet seasons.

“We recommended insurance for all our regular programs, not just the QTA, specially in areas prone to typhoon like Bicol, Region 8, Region 11, and Caraga,” he said.