Agriculture ends tough 2022 with renewed hopes

MANILA, Philippines — Challenging. Crisis. Controversial. This was how some agricultural stakeholders described how the sector fared in 2022.

Indeed, it was still a difficult year for the Philippine agriculture sector as importation still trumped over local production.

The industry also continued to reel from the impact of the COVID-19 pandemic plus the Russia-Ukraine war which pushed up input and food costs and worsened logistical issues globally, further hurting local producers.

The year also saw a change in administration, from one that favored policies on the importation of some agricultural products amid supply and price pressures to another which placed high priority on the agriculture sector.

With a promise to attain food self-sufficiency and reduce the country’s dependence on imports.

The previous administration was widely criticized for having implemented policies that prioritized the excessive importation of some agricultural products such as meat, fish, sugar and rice.

This fondness for importation marred the sector, on top of the impact of typhoons on agricultural lands, the African swine fever (ASF) on the hog sector, the Highly Pathogenic Avian Influenza or bird flu on the poultry sector and the lingering effects of the COVID -19 pandemic.

With a new administration, a new hope shone over the agriculture sector as President Marcos decided to personally take the helm of the Department of Agriculture (DA) with the goal of attaining food self-sufficiency and reducing the country’s dependence on importation.

But six months into the Marcos administration, that promise – at least reducing dependence on imports – has yet to be fulfilled.

Early into his administration, the sector has been besieged by a shortage in sugar supply, stunted quality of chicken and reduced palay production.

Not much has changed from 2021 to last year for the agriculture sector – it is still in a “crisis,” Federation of Free Farmers (FFF) chairman and former agriculture secretary Leonardo Montemayor said.

He said that “reducing production costs such as fertilizer and fuel, addressing wide disparity between farmgate and retail prices of food, and dampening effect of excessive imports on prices received by local producers” were the main factors for the agricultural crisis this year.

The Russia-Ukraine war, which erupted in the first quarter, sent the global oil market spiraling out of control with the Dubai crude touching $120 per barrel.

As the Philippines is heavily dependent on oil imports, local fuel prices saw unprecedented increases – with fears that pump prices could reach P100 per liter.

While fuel prices have gone down from record highs, year-to-date total adjustments still stand at a net increase of P13.95 per liter for gasoline, P27.50 per liter for diesel, and P20.80 per liter for kerosene as of Dec. 20, according to data from the Department of Energy.

As the previous government extended low tariffs on major agricultural products under Executive Order 171 until the end of this year, the Foundation for Economic Freedom (FEF) – a group of economists, policymakers, business leaders and advocates – pushed to further extend this regime.

This was recently approved by President Marcos who chairs the National Economic and Development Authority (NEDA) Board, as endorsed by the Board’s Committee on Tariff and Related Matters.

With the President’s go ahead, low tariffs on major agricultural products under EO 171 will be extended for another year or until Dec. 2023.

This means importers will get to enjoy 15 percent in-quota and 25 percent out quota tariff rates for pork, reduced tariff of 35 percent on imported rice, five percent in quota tariffs on corn.

On the other hand, local producers will not get to enjoy the same benefits as this will hurt their yields and leave them further discouraged to produce.

“Only a few privileged importers and traders have benefitted and will continue to benefit in extending the EO. Not the producers, not the consumers, not the government,” Samahang Industriya ng Agrikultura (SINAG)executive director Jayson Cainglet said.

Philippine Maize Federation Inc. president Roger Navarro said the poor would not be the ultimate beneficiary of the extended EO “because the majority of the very poor sector that is going to be affected the most are dependent on agriculture and are involved in the chain of the farming activities in both rural and urban centers.”

However, the DA defended the move to extend the low tariff regime on select commodities to allow it leeway to manage food security and affordability through importation as local production still reels from the impact of typhoons and outside risk factors.

DA undersecretary for policy, planning, and regulations Mercedita Sombilla said achieving higher local production amid challenges such as typhoons, impact of the Russia-Ukraine war and animal diseases is difficult that is why it needs to be balanced with imports.

“We at DA are trying to balance importation and production so we can stabilize prices,” she said.

According to the DA, food has been a major factor in pushing up the headline inflation rate.

Latest inflation data rose to eight percent in November, a 14 year-high, largely due to faster food price upticks, the Philippine Statistics Authority (PSA) said.

The DA acknowledged the food crisis in the country—and the world in general—is facing.

“As you can see from the inflation rates, there are really food shortages. We have food shortages in

terms of fish, meat. But we have enough supply, albeit our inventory declined a bit primarily because of the challenges that we encountered towards the end of the year such as the continuing impact of the pandemic and the Russia-Ukraine war,” Sombilla said.

But the agency is working to help local producers through interventions.

“There has been a lot of interventions to really push for the increases in production. But our adversaries are quite strong—the typhoons and the Russia-Ukraine war, which really caused us problems when it comes to inputs such as fertilizer and oil,” Sombilla said.

And still related to importation, sugar—a highly politicized commodity—has had its fair share of controversies this year.

“The sugar industry for the year 2022 started with a lot of controversy, Blue Ribbon Senate hearings. But thanks to the President, he took charge and stabilized the industry,” United Sugar Producers Federation (UNIFED) president Manuel Lamata said.

The country faced sugar supply deficit early this year on low production due to the impact of typhoons, high demand as economy picks up and the delay in the import program in February, then SRA administrator Hermenegildo Serafica said.

In line with the lower sugar production estimate, the SRA implemented last February a sugar importation program for 200,000 metric tons (MT) of refined sugar under Sugar Order (SO) no. 3.

However, its implementation was stalled by temporary restraining orders (TROs) issued by two regional trial courts in Negros Occidental as sought by some sugar groups.

As the sugar to be imported was supposed to be allocated for industrial use, manufacturers started buying up raw sugar intended for consumer use.

SO 4 was signed by then DA undersecretary Leocadio Sebastian and Serafica to import 300,000 MT of raw and refined sugar specifically to address the sugar supply situation and its rising prices.

This started the sugar importation brouhaha as President Marcos said he did not authorize—as chairman of the Sugar Regulatory Authority (SRA) Board—the 300,000 MT importation under SO 4.

The sugar mess has resulted in the resignation of SRA board members that signed the controversial order, the reorganization of SRA, the conduct of Congressional hearings and the raid of several warehouses to check on the real state of the country’s sugar inventory.

As the sugar issue died down, the new SRA board approved in September an import order of 150,000 MT of refined sugar under SO2 to stabilize supply and market prices.

After SO2, SRA acting administrator David John Thaddeus Alba then said they would not import as local production stabilizes amid the harvest season and as sugar refineries go on full operations.

Prices were also projected to normalize in November from record highs of P126 per kilo of refined sugar in the retail market.

True enough, sugar supply stabilized as shown by data from the SRA.

Raw sugar production rose 24.02 percent to 662,471 MT as of Dec, 11 from 534,167 MT in the same period last year.

Refined sugar production also jumped by 36.36 percent to 181,888.30 MT.

Meanwhile, the total refined sugar stock stands at 203,704.80 MT, up 56.66 percent from the same period last year.

However, this failed to bring down the retail prices of sugar.

The composite price of raw sugar was at P3,013.49 per 50 kg (LKG) bag as of Dec. 11, up 76.86 percent from P1,703.92 per LKG in the same period last year, based on the SRA millsite monitoring.

Wholesale prices of raw sugar also shoot up by 102.7 percent to P3,750 per LKG while whole refined sugar prices soared by 83.67 percent to P4,500 per LKG.

On a retail level, raw sugar sold for P87 per kilo, up 91.11 percent from P45 per kilo last year, while refined sugar fetched a price of P106 per kilo, 94.5 percent higher.

And now, the Philippines is again set to import additional refined sugar as President Marcos directed the DA to fast track the import of 64,050 metric tons (MT) of refined sugar through the Minimum Access Volume (MAV) mechanism to address the spike in the retail price of the sweetener.

Sugar producers are opposing this new round of importation, urging the President to rethink the said order.

Instead, the government should wait and assess sugar stocks after the milling season and decide whether we need to import or not, Lamata said.

The sugar industry is currently at its peak of harvests and imported sugar under the new importation order will only be able to come in in two- to three-months’ time, which is already too late to address unreasonably high sugar prices driven by Christmas demand , and enjoy.

Agricultural smuggling was center stage in the sector this year. Sugar, onions, carrots—you name it.

Amid the rising smuggling cases of agricultural products, the DA created the Office of Assistant Secretary for Inspectorate and Enforcement to curb smuggling and price manipulation, to ensure food safety and food security, promote fair trade, and protect the livelihood and well-being of the farmers and fisherfolk.

The new office will lead the agency’s efforts against agricultural smuggling in line with the Anti-Agricultural Smuggling Act of 2016 and the Food Safety Act of 2013.

So far, the DA has seized over P500 million worth of agricultural products this year, DA assistant secretary James Layug said.

While the year may be filled with troubles, there is a lot of learnings for policymakers in the agriculture sector, Philippine Chamber of Agriculture and Food Inc. (PCAFI) president Danilo Fausto said.

“We need to look back on what happened this year to solve the problems next year,” he said.

The President and people at the DA are urged to focus on preparing the groundwork for measures and infrastructure support to raise local production.

“The agriculture sector has the lowest productivity…but if you improve the income of farmers, you increase demand,” he said.

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