High production costs, low farm gate prices battering rice farmers

High production costs, low farm gate prices battering rice farmers – KMP

Published on February 16, 2012

By INA ALLECO R. SILVERIO
Bulatlat.com

The day after their successful National Rice Farmers’ Conference held at the University of the Philippines, farmers from Luzon, Visayas, and Mindanao led by the Kilusang Magbubukid ng Pilipinas (KMP), Amihan – National Federation of Peasant Women, and Anakpawis party-list held a mass action at the Department of Agriculture (DA) in Quezon City to highlight their demand for an increase in the the farm gate prices of unhusked rice or palay to P20($ 0.465) per kilo.

They said the continuing oil price hikes are pushing rice production costs to the sky.

The peasant groups submitted to Agriculture Secretary Proceso Alcala a manifesto signed by more than 100 farmer-leaders across the country declaring their readiness to launch a national campaign to press for an increase in the prices of palay. KMP secretary general Danilo Ramos said the DA should heed this demand if the Aquino government is sincere in achieving food security.

“The very low prices of our produce negatively impacts on the food supply, stability and security of the country. At the same time, the skyrocketing costs of production, particularly the endless series of oil price hikes, have grossly affected farmers’ capability to produce and plant for the next crop season,” Ramos said.

According to the peasant leader, the continuing increase in oil prices and the government’s continuing implementation of the deregulation policy in the oil industry have contributed greatly to the deterioration of the country’s rice production. He said the costs of production per hectare has shot up to a minimum of P75,000, ($ 1,744) covering land rent, fertilizers, pesticides, and machinery rentals.

The group also said that during harvest season, some merchants, rice traders, and their agents buy palay at an even lower cost of P10.00 ($0.23) per kilo; and that during the rainy season, the price is even wont to go down further.
Ramos said every rice farmer spends P18.75 ($0.44) for every kilo of palay, and the average harvest is pegged at 80 cavans or 4,000 kilos per hectare. In contrast to the P18.75 ($0.44) farmers lay out for every palay kilo, most rice traders buy palay at the average price of P12.00 ($0.27) per kilo. The NFA buys unhusked rice for a slightly higher price of P17 ($0.40) per kilo.

“This is why so many rice farmers are deep in debt and are often forced to run to loan sharks,” Ramos said.

Driving rice prices up

The KMP is also protesting against the relentless oil price hikes. According to Ramos, the high price of oil is also a heavy burden farmers are forced to shoulder.

To plow a hectare, Ramos explained, a rotavator and hand tractor need an estimated 600 liters of gasoline every planting season. Gasoline-operated irrigation pumps consume at least 150 liters during the same period.

“At P55 ($1.28) per liter, each rice farmers needs to allot P41,250 ($959) for gasoline alone. Every P1 ($0.023) increase in the price of gasoline means an added P750 ($17.44) per hectare to the production expenses for the rotavator, hand tractor, and irrigation pump,” he said.

Last February 14, oil companies imposed under round of oil price hikes. Petron Corp., Pilipinas Shell Petroleum, Chevron Philippines, SeaOil Philippines and Total Philippines added P.50 to the prices of their regular and premium gasoline. Petron is now selling its diesel at a price higher by 70 centavos ($0.016) per liter. The rest of the oil companies added 85 centavos ($0.02) per liter to their diesel prices.

It is the sixth oil price increase this year, while there have been two price rollbacks. According to the Department of Energy (DOE) the year-to-date net increase stands at P3.60 ($0.08) per liter for gasoline and P2.15 ( $0.05) per liter for diesel.

In the manifesto it gave to Alcala, the KMP said, “To produce the staple food of the people, farmers shoulder the high costs of production. This includes the continuing increase in the prices of petroleum products being used by farmers for land preparation, planting, irrigation, fertilizer and pesticides, thresher, milling, transportation, up to the marketing of produce.”

In the meantime, there are also those who argue that an increase in the prices of palay will automatically lead to an increase in the price of rice.

Ramos said this argument has no economic basis.

“The main culprit in the increasing prices of rice in the local market is the monopoly by rice cartels and the Aquino government’s policy of massive rice importation. In fact, rice prices continuously increase despite very low prices of palay,” he asserted.

The role of the National Food Authority in the production woes of farmers cannot be dismissed.

The KMP charged the National Food Authority (NFA) of “not directly buying palay at the farm-gate” and that “farmers are having a hard time selling palay to the grain agency because of the bureaucratic process and the stringent requirements the NFA imposes.”

“Unfortunately, the NFA cannot influence prices at the farm gate because it only buys less than two percent of the country’s total rice production. What makes the situation much worse and twisted is how the NFA budget is being used for the massive importation of rice that further pulls down local palay prices instead of buying our local produce,” Ramos said.

New NFA-LGU agreement on palay procurement

In a related development, the NFA and the provincial government of Leyte recently signed a memorandum of agreement that will supposedly ensure an increase in palay procurement accomplishment this year.

NFA 8 Regional Manager Alan Borja and Leyte Governor Carlos Jericho L. Petilla signed the MOA which allows the NFA to procure the palay deliveries collected by the Leyte local government from farmers who have availed of the Increased Crop Output thru Rural Infrastructure and Community Empowerment, otherwise known as the ICOT-RICE project.

In a report, Borja said the increase in palay procurement will ensure the availability of cheaper NFA rice for the disadvantaged sectors of society. With more buffer rice stock in the country, there will be lesser need to import rice.

This, the official pointed pout, also assures the replication of the 124 percent palay procurement accomplishment of the NFA Regional Office. For 2012, the Agency expects to surpass last year’s procurement accomplishment of 23,573 bags translated to P19,591,065 ($455 thousand) including incentives.

“This mode of procurement is a novel idea because nowhere in the country, with the exception of Leyte, has the Agency been allowed to procure palay from any LGU,” Borja said. He went on to say that the Leyte Provincial Government sought NFA’s assistance for the procurement of the palay proceeds from the ICOT-RICE Project, which provides soft loans to poor farmers who pay the same in the form of palay after harvest.

“At the outset, this would seem to be a mission impossible considering that the NFA is not allowed to buy palay from any LGU,” Borja said. “We underwent through the nitty-gritty process until we finally got the approval of Administrator Banayo and the perfection of the MOA.”

The Regional Manager said the signing of the memorandum of agreement between NFA and the Province of Leyte became a landmark conclusion to an otherwise not feasible proposition.

Under NFA’s palay procurement program, the agency buys palay at P17 ($0.395) per kilo, but the rice has to be clean and dry or with 14 percent moisture content and “Purity A” level. Palay deliveries falling below this specification, however, will still be accommodated but will fall subject to buying price adjustments computed in accordance with the current NFA Equivalent Net Weight (ENW) table for standard palay specifications.

Based on the MOA, in cases when the Leyte local government uses NFA’s drying facilities for the collected palay stocks from its farmers-beneficiaries, the latter will charge the corresponding drying fees of twenty centavos per kilo, if stocks are sold to NFA. If the palay, after drying, fails the NFA standard specifications and cannot be procured,the provincial government will be charged with the drying fees based on commercial rates.