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The ‘new thinking' for agriculture

by Dr. William D. Dar

Introduction

The country’s farming and fisheries sector is in a “critical” stage, as it has erratically grown in the past five years

In 2014, the sector grew by 1.83 percent (%), slid to 0.11% in 2015, and inched up by 1.41% in 2016.

In 2017, it grew by 3.95%, but posted a dismal 0.56% growth in 2018 —disappointingly below the government’s target of 4%.

Of the country’s total labor force of 42.78 million, 25% or 10.26 million are employed in the agriculture sector.

They are mostly self-employed, small, marginalized, and belong to the country’s "poorest of the poor,” according to the Philippine Statistics Authority (PSA).

With the advent of climate change, Filipino farmers, fisherfolk and their household—averaging with more than six members each—are most vulnerable, thus making them less food-secure.

The PSA said the country’s rural poverty incidence remains high, at 30%.

Prosperity is thus non-existent in almost all agriculture households in the Philippines, with the PSA in its Family Income and Expenditure Survey showing a typical Filipino farmer earning an average of only P100,000 per year. This is a little below the poverty line of P108,000 of 2015.

Hence, increasing the low incomes of small Filipino farmers and fisherfolk could be the key to leveling up the country’s agriculture sector, starting in the remaining three years of the Duterte administration.

Currently and in the past decades, there is low farm productivity, lack of value-adding as well as very few alternative sources of income not related to farming and fishing.

To create non- or off-farm jobs, farm productivity should be increased coupled with value-adding, resulting in the creation of agri-related downstream industries.

A myriad of challenges can be blamed for low farmer and fisherfolk income, namely:

  1. Low farm productivity
  2. Lack of labor
  3. Unaffordable and inaccessible credit
  4. Limited use of technology
  5. Limited farmland diversification
  6. Undeveloped agri-manufacturing and export
  7. Severe deforestation/land degradation
  8. Aging farmers and fisherfolk
  9. Climate change

However, leveling up the agriculture and fisheries sector presents vast opportunities for creating more jobs and generating more wealth in the countryside—thus contributing more to the country’s gross domestic product (GDP).

To date, the agriculture sector accounts for about 9% of the country’s GDP, while 25% is accounted for by agro-processing and related activities.

Also, 25% or 10.3 million of the country’s 42.8-million workforce is in the agriculture sector.

Since the 1960s and 1970s, the government has introduced many affirmative action programs that sought to help the farm sector, including three waves of agrarian reform to give land to the landless, farm credit programs and support initiatives under various presidents, farm extension, tens of thousands of kilometers of farm to market roads, some level of farm mechanization in select areas, and price support programs as well as quantitative restrictions. These, however, were mostly to no avail because they were designed to solve the problems of an ideal set of beneficiaries – land-owning, educated, with a modicum of political connections – far from the real circumstances of the average Filipino small hold farmer who is unable to access low cost finance for inputs, has limited links to the value chain and retail markets, and no access to better inputs and modern technologies.

DOUBLING FARMERS’ INCOMES

Doubling the income of smallholder farmers and fisherfolk in five years is doable. Their sources of income should include off-farm and non-farm activities like agri-tourism. 

It could be done with the use of relevant and innovative technologies, provision of affordable credit, wide adoption of economies of scale through collective action, value-adding, developing markets at the local, national and global level, sustained empowerment and skills development of farmers and fisherfolk, and provision of sustained government budget support augmented by private sector investments.

Other imperatives must be undertaken such as mechanization, development of rural infrastructure including market infrastructure, research and development, development-oriented regulatory support, and climate-smart agriculture.

Below are eight paradigms to level up the country's agriculture sector: 

  1. Modernization must continue.
  2. Industrialization of agriculture is key.
  3. Promotion of exports is a necessity.
  4. Consolidation of small- and medium-sized farms.
  5. Infrastructure development would be critical.
  6. Higher budget and investment for Philippine agriculture.
  7. Legislative support is needed.
  8. Roadmap development is paramount.

Those paradigms make up the “new thinking” to double the income or earnings of farmers and fisher folk.

The “new thinking” should have for its vision: A food secure Philippines with prosperous farmers and fisherfolk.

Furthermore, its mission is: To collectively empower farmers and fisherfolk and the private sector to increase agricultural productivity and profitability, taking into account sustainability and resilience.

The mission and vision should guide the actors and stakeholders in the agriculture sector to ensure the achievement of the objective of making farmers and fisherfolk prosperous, with the eight paradigms below putting in place the required policies, programs, projects and funding.

(1)    Modernization of agriculture is crucial.

The term “modernization” may sound intimidating to most smallholder farmers, as it could connote getting rid of the carabao in favor of farm machines that they may not be ready to operate and maintain.

But in a modernized farming environment, the carabao is no longer used as a beast of burden but a source of income by way of dairy production. The Philippine Carabao Center (PCC) already has programs on how to integrate carabao dairy production into regular farming activities. And the PCC has reported remarkable results from farmers who have integrated carabao dairy farming operations into their regular crop-raising activities.

The opportunity to instill the concept or paradigm to modernize the country’s agriculture sector is also presented in Republic Act (RA) 11203, or the “Rice Tariffication Law” that establishes the Rice Competitiveness Enhancement Program (RCEP). RA 11203 allocates P10 billion per year for RCEP in the next six years up to 2024. Of the P10 billion, P5 billion would be invested for farm mechanization, P3 billion for the provision of high-yielding seeds, P1 billion for credit support, and P1 billion for training of rice farmers.

Properly implemented and judiciously spent, the P10 billion could reduce the price of producing palay (unmilled rice), which currently stands at P12.72 per kilo in the Philippines. That is higher compared to Thailand’s P8.86 per kilo and Vietnam’s P6.22 per kilo.

Implementation of RCEP can lower the production cost of palay by as much as P6 per kilo.

However, modernization and the use of modern technology like balance nutrient management and others must also cover other crops, particularly those with export potential in processed or value-added form like coffee, cacao, cassava, tropical fruits, rubber, among others. Relative to that, there is a need to diversify crop production in the Philippine agricultural landscape.

About 80 percent of the country’s farmlands are devoted to only three crops: rice, corn, and coconut.

Modernizing Philippine agriculture would also need attracting the youth into farming, as the average age of farmers in the country is from 56 to 60 years old.

Since the youth are tech-savvy and receptive to technology, their entry into the agriculture sector, especially as agripreneurs and infomediaries, would greatly help modernize Philippine agriculture. Hence, programs, projects and policies to attract more of the youth into the agriculture sector are a must.

In training the youth, the country has dozens of good agriculture colleges and universities that have graduated thousands of agriculture scientists and specialists. Philippine agriculture universities have in fact been acknowledged to have trained many of the experts and practitioners that helped raise the agriculture sectors in neighboring countries such as Thailand, Indonesia, and Vietnam – which have overtaken the country in terms of overall agriculture production, farm-level productivity and exports.

Thailand and Vietnam’s agriculture development each has also been anchored on building enterprises for farmers, which allowed them to tap the export market.

So in the Philippines, agripreneurship should also form part of the paradigm to modernize Philippine agriculture, as farming and fisheries should be treated as business undertakings or industries, which brings us to the next paradigm of industrialization.


(2)    Industrialization of agriculture is key.

Agriculture must be treated as an industry, with the objective of industrializing the value chain of every agricultural commodity. While productivity increase is a major objective, it is equally important to produce more income by value adding, processing, manufacturing, and developing markets for both raw and processed agricultural products.

There is also a need to bring in more active leadership into the agencies involved with the country’s agriculture sector, and engage the private sector in setting up more agri-based industries and developing markets for agriculture products.

Also, links should be established between the large agri-industrial firms and conglomerates in the country, and this could be done through agriculture and rural-based cooperatives, coop federations or farmers’ cooperatives and marketing associations, with the support of state colleges and universities (SCUs). Other joint venture arrangements can be pursued between private sector and the farmers or fisher folk.

But let us not forget establishing sustainability and resiliency every step of the way.

Relative to the industrialization of Philippine agriculture is creating the framework for the digitization of farming and agribusiness activities in the country, to make way for “Agriculture 4.0.”

Among the digital technologies that can be adopted for Philippine agriculture are data analytics, artificial intelligence, geo-mapping, computerization and tapping the Internet of Things. Also, the use of drones is increasing in agriculture worldwide.

Furthermore, industrialization of Philippine agriculture should foster the formation of social enterprises, or those that would involve more of the marginalized in the agricultural value chain while assuring they get their fair share from the fruits of production.

Also, more investments on income- and market-oriented agricultural research for development (R4D) must be made by the government, with SCUs getting more involved. Since most SCUs are located in the provinces, these institutions could know first-hand what type of industries related to agriculture that can be established in their areas based on current activities, and potential from various factors like water and soil resources, climate and location, and markets.

To ignite industrialization as well as modernization in the rural farm economy, the formation of community agriculture management companies/corporations (CAMCs) could be adopted as a measure.

Operating at the village or municipal level, the CAMC’s mandate is to institute a profit-based model in transforming communities by taking part in rural production systems, establishing contractual partnerships that are more socially equitable compared to their traditional economic relations (i.e. away from commodities traders or "compradors"), and introducing newer technologies to the farmer-partners by way of required meetings and learning sessions. The CAMC intends to address these gaps by organizing farmers into managed enterprise groups for contract farming and by engaging itself in the business of trading farm inputs, credit provision, training of agriculture stakeholders, contract growing, and marketing, among others.

(3)    Promotion of exports is a necessity.

The country should have a systematic and long-term strategy in developing and promoting exports of raw and processed agricultural products.

That means exports of agricultural products should not depend on surplus production to supply the international market. What should be done is to achieve economies of scale in on-farm production that would give us sustained quantity and quality of export products.

Again, the private sector’s role will be essential in developing and promoting agricultural products, including establishing and seeking the markets abroad. The government must also provide a nurturing environment including policy support to encourage the farming sector and the private sector to level up, so the Philippines can export more agricultural products.

At present, the Philippines only has two agricultural products that earn at least $1 billion per year in export receipts: bananas; and coconut products (mostly in oil form).

UN Trademap data shows Thailand has 13 types of farm exports earning over $1 billion each a year, Indonesia has five, and Vietnam has seven.

As mentioned in No. 1, there is a need to diversify crop production in the Philippine agricultural landscape. The measure would help the country grow more crops for export.

The CAMCs can also take the lead at the community or village level to organize farmers and fisher folk so they can enter the value-chain for the export market.

(4)    Consolidation of small- and medium-sized farms is a must.

The government must promote and support land consolidation arrangements to bring about economies of scale, particularly for crops that require mechanization and massive use of technology. These schemes include block farming, trust farming, contract farming, and corporative farming that will make farming more efficient, where technology is used, where cost of production is reduced, and farm productivity and incomes are increased. These schemes will also enable the farmers and their partners establish agribusiness ventures. With higher and better quality production, linking agriculture to the domestic and global manufacturing sectors, and accessing markets become easier.

According to the Philippine Rice Research Institute, the average landholding of rice farmers in the country is 1.48 hectares.

Consolidating small- and medium-sized farms is also a crucial step to achieve collective action, since it would be easier for government and private entities to deal or transact with organized farmers. This will also help link more farmers to the agro-industrial sector.

Farmers who will take part in any form of consolidation must be required to co-produce in groups of contiguous farms with synchronized farm activities based on group production plans. They will also be asked to attend regular meetings and learning sessions in farm technologies, financial literacy, and marketing, so they can further improve their production efficiency.

(5)    Infrastructure development will be critical

Infrastructure development will be critical so agricultural areas in the countryside could be utilized more and to improve their linkages to the urban/domestic and export markets. Thus, a “Build, Build, Build” program is also a must for agriculture.

There is also a need to engage the private sector in a “build and transfer” scheme to accelerate the development of national irrigation systems. Irrigation development, however, should also cover high-value commercial crops and not just rice.

Massive investments must be provided for rainwater harvesting not only for economic purposes but also for flood mitigation. More solar-powered irrigation systems should also be built all over the country.

Furthermore, food terminal markets in strategic areas including facilities for post-harvest handling, packaging, and related facilities, including farm-to-market roads, to enhance agri-industrialization should be constructed in the rural areas.

(6)    Budget and investment for Philippine agriculture must match needs.

With a forward looking Philippine agriculture that has a roadmap, the government with the strong and popular support from the citizenry, must provide the necessary budget and investment to grow and develop Philippine agriculture. The increased budget will help unlock the bigger potential contributions of agriculture and agribusiness to the economy, including more employment opportunities.

New ideas, new programs and projects are needed to innovate Philippine agriculture.

Budgets for programs/projects for Philippine agriculture can also be legislated, as in the case of the RCEF that is stipulated in Republic Act 11203 or the Rice Tariffication Law. As stated in No. 1, RCEF programs P10 billion in annual investments for the rice industry for the next six years, or a total of P60 billion.

(7)    Pro-poor legislative support is urgently needed.

With the above outlined strategies and directions, the country’s agriculture sector needs the help of both the Senate and the House of Representatives, for policy and structural reforms that need to be legislated and institutionalized.

President Rodrigo Roa Duterte can also certify urgent legislative measures for agricultural and rural development.

More pro-poor laws are also needed, like the Sagip Saka Act or RA 11321 that establishes the "Farmers and Fisherfolk Enterprise Development Program" referring to “the comprehensive set of objectives, targets, and holistic approach in promoting the establishment of enterprises involving agricultural and fishery products.”

One of the recent laws passed that legislates support for the farming sector is the Rice Tariffication Law or RA 11203, which stipulates the allocation of P10 billion annually for six years to fund programs and projects to modernize the country’s rice industry. With the tariff collection coming in, the budget should now be programmed into the new PH Roadmap.

(8)    Development of New Roadmap is paramount.

The roadmap should have all the abovementioned paradigms and present the Vision for PH Agriculture, which should result, as a minimum:

Inclusive Development in Farming & Fishing Villages

The roadmap should be guided by the following Goals: increased productivity, profitability, competitiveness, sustainability and resilience. It must also cover a period of at least five years and the ultimate aim is to double the income of small holder farmers and fisher folk.

The formulation of the roadmap should also involve small holder farmers/fisher folk, local government units, SCUs, civil society groups, and the private sector.

Involving small holder farmers and fisher folk will assure that the roadmap will also result in inclusive growth, or the wider and equitable distribution of the fruits of economic growth and prosperity.

The roadmap should also have a value-chain approach to level up Philippine agriculture, while making sure the smallholders also earn their fair share of the fruits of production along the value chain.

The government, through the Department of Agriculture, should take the lead in generating the “big ideas” for the roadmap, and should solicit inputs from the private sector.

The roadmap should also actively involve the private sector, which may have more access to the export markets and funding for research for development.

CONCLUSION

The Philippines can learn from India.

The doubling the income of farmers and fisherfolk is currently being pursued by India that has set its attainment by 2022. The initiative is being led by the National Institution for Transforming India (NITI).

A paper titled from NITI titled “Doubling Farmers’ Income Rationale, Strategy, Prospects and Action Plan” authored by Ramesh Chand revealed that despite the success of India in increasing food production by 3.7 times from 1965 to 2015, resulting in a 45-percent increase in food production per person, poverty still persists among its farmers.

The NITI paper said that even with India’s success in increasing food production over a 50-year period, it admitted that the “strategy did not explicitly recognize the need to raise farmers’ income and did not mention any direct measure to promote farmers’ welfare.”

In essence, the ranks of farmers were simply used as tools to increase food production, which is a paradigm that is blindly or unintentionally implemented in many developed countries, including the Philippines.

India’s own data covering 2011-2012 showed that about 20 percent of rural households that relied on self-employment for agriculture as their main source of income were earning below the poverty line. This is similar to the Philippine situation based on latest statistics of the Philippine Statistics Authority (PSA).

According to the “Trends in Agricultural Wages Rates 2015-2017” released by the PSA in November 2018, the average wage rate of agricultural workers in the Philippines was P260.43 in 2017, with those in the Calabarzon (Region 4A) receiving the highest wages.

Based on figures from the PSA report, the yearly income of Filipino farmers is only P100,800, which is below the poverty line.

Among the measures stipulated by the NITI paper to attain the objective of doubling farmer’s incomes by 2022-2023 are:

  1. (a)increase in cropping intensity

(b)diversification towards high value crops

  1. (c)improving the system of trading farm products so farmers get fair or real prices for their produce

The NITI paper also emphasized the need to localize and transfer technologies to small farmers, noting that India already hosts international agricultural research centers and has SCUs that generate agri-based technologies.

When it comes to the value chain, the NITI paper said factors like lack of storage facilities for farm produce, and lack of scientific methods to extend shelf life of farm produce can cause price crashes to the detriment of farmers.

The NITI paper identified the three-pronged strategy to double farmers’ incomes by 2022: development initiatives; technology; and policy reforms.

Development initiatives include increasing the areas with irrigation and lands planted to high fruits and vegetables, and improving the quality of livestock.

For technology, the NITI paper also mentioned the need for grassroot level innovation and promotion of traditional practices that have proven to be sustainable, resilient and income enhancing.

The Philippines can learn from the initiative of India in doubling the incomes of farmers and fisher folk. However, the first and most important component to achieve that is a change in the mindset towards agriculture development, where the smallholders get a fair share from the fruits of production, and are lifted out of perpetual poverty hopefully within five years.

When it comes to food security, it would come as a surprise to some observers that Singapore, with has no lands to grow food, is the most food-secure country in Southeast Asia, garnering a score of 85.9 out of 100 from The Economist Intelligence Unit (EIB). Despite sourcing over 90% of its food from abroad, Singapore is food-secure because it has the money to acquire and stock food stocks, with the country having a high per capita GDP enabling them to buy adequate food stocks.

On the other hand, the Philippines and Indonesia, both rice producers and importers, got scores of 51.5 and 54.8 from the EIB in terms of food security.

Hence, food security is a better goal compared to food self-sufficiency that is sometimes mistaken to be food security by some bureaucrats.