DA should try focusing on agriculture for a change
Credit to Author: BEN KRITZ, TMT| Date: Wed, 16 Jan 2019 16:12:36 +0000
OF all the departments in the Cirque du Duterte, the one that has seemed the most inexplicably cursed to constantly stumble from one crisis to another is the Department of Agriculture. Having started the new year grappling with half a billion in crop losses from a minor storm, the DA begins this week fighting a new problem the world has thrown at it: Chickens.
Chicken producers here in the Philippines have taken the DA to task because of falling farmgate prices for poultry. Farmers are only able to sell chicken for about P38 per kilo at present, while retail prices are ranging from P130 to P160 per kilo. As with other agricultural commodities in which local producers have been disadvantaged, the price disparity for chicken is being blamed on “distortive market forces,” chiefly rapidly growing imports.
Based on statistics from the Department of Trade and Industry, imports of chicken in 2018 were between 30 and 35 percent higher than they were in 2017, and are expected to increase by a further 10 percent this year. Local production did increase by some 20 percent last year, but the obvious conclusion from the import statistics is that local producers are nowhere near being able to meet demand.
Why that is apparently so difficult for the DA and its concerned sector to figure out is a mystery, but they clearly have not grasped the message. Just as with rice, corn, sugar, onions, garlic, chili peppers, palm oil, and fish, all the efforts to help local producers have been directed at practically everything except boosting productivity.
In the case of chicken, just as with rice, Agriculture Secretary Manny Piñol’s first inclination was to impose price controls. Disregarding any effect on consumers, Piñol suggested that chicken producers could simply arbitrarily raise their farmgate prices by P10 per kilo each week until they reach a level where they are no longer losing money.
The Philippine Competition Commission quickly scotched that idea, however, pointing out that it was patently illegal price-fixing. Instead, the PCC suggested that the DA help chicken producers in a more sustainable way by working on ways to boost productivity and provide more access to agricultural credit.
For its part, the DTI weighed in on the issue with the completely unrealistic recommendation that the DA impose import restrictions to support local farmgate prices. This suggestion is as inconsiderate of consumers as Piñol’s price-fixing idea, because it attempts to create an artificial shortage. Unless supply conditions are such that local farmers are simply dumping surplus chicken — and no one, not even the farmers themselves, has indicated that is the case — then import restrictions do nothing but trade the supply-side problem for a demand-side one.
All of this is ironically taking place against the backdrop of a failed trade discussion with Indonesia, in which the Philippines was seeking to reduce the huge imbalance in agricultural trade between the two countries. Indonesian agricultural exports to the Philippines total about $1 billion per year; Philippine exports to Indonesia are a paltry $50 million.
Philippine efforts to get Indonesia to accept more agricultural imports were rebuffed, and it is not difficult to understand why. With similar geography, climates, and diets, the two countries produce practically the same things. The only reason either has for importing products from the other is if there is a supply deficit, or demand for a unique product that simply can’t be produced locally. Indonesia is not agriculturally self-sufficient and does import a large amount of food, but it produces an adequate amount of the few things the Philippines does produce in exportable surplus quantities, like bananas. The Philippines, by contrast, has a huge unmet demand for some things Indonesia produces in surplus, like palm oil. Until the Philippines can find or create a market niche in Indonesia, the latter will have no practical reason to help balance trade between the two nations.
As the saying goes, “The common denominator in all your unsatisfying relationships is you.” The DA only need look at itself to understand why its efforts seem to constantly fall short. The agency, it seems, prefers to spend most of its time and energy pursuing price policy, trade policy, and practically anything other than substantial agricultural policy that deals with the clear root cause of all the country’s food security woes: Lack of productivity.
Shifting its concern to what Philippine farms are producing rather than the output of farms in other countries would be a better way for the DA to acknowledge its actual mandate. It can make a good start by shifting its policy orientation away from the quaintly compassionate but absolutely economically irrational ideal of championing smallholder farmers. No net exporting country became so without consolidating its agricultural sector into units of practical scale; after almost 40 years of trying, it seems highly unlikely the Philippines will become the first.
ben.kritz@manilatimes.net
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