NAST Monograph Series No. 3

TOWARDS FOOD SECURITY AND RICE-SELF SUFFICIENCY:

A MAJOR DEVELOPMENT CHALLENGE FOR THE PHILIPPINES

IN THE NEW MILLENNIUM

Leonardo A. Gonzales

STRIVE Foundation

Published by The National Academv of .,

Science and Technology (NAST) Philippines Manila, Philippines

NAST Monograph Series No. 3

TOWARDS FOOD SECURITY AND RICE SELF SUFFICIENCY:

A MAJOR DEVELOPMENT CHALLENGE FOR THE PHILIPPINES IN THE NEW MILLENNIUM

Leonardo A. Gonzales

STRIVE Foundation

Published by The National Academy of Sc.ience and

Technology Philippines Manila, Philippines

Gonzales LA. 2003. Towards Food Security and Rice-Self Sufficiency: A Ma1or Development Challenge for the Philippines in the New Millenium. National Academy of Science and Technology Philippines, Manila, Philippines. 85 pp.

NAST Monograph No. 2

Copyright© 2003 by the Author. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means without prior written permission of the author or the publisher.

ISSN 1655-4299

Edited by: Acd. Evelyn Mae Tecson-Mendoza

Published by The National Academy of Science and Technology Philippines 2/F Philippine Sc;ence Heritage Center, DOST Complex, Taguig, Metro Manila, 1631, Philippines. Email: nast@dost.gov.ph; nast@mozcom.com http://www.dost.gov.phlnast

ii

PREFACE

Without doubt, rice is the most important staple food in the Philippines and the rest of the world. The National Academy of Science and Technology (NAST) Philippines has recognized the important role that rice plays not only in the nutritional well-being of our countrymen but also, in the socio-political stability of our country. Thus, NAST commissioned Dr. Leonardo A. Gonzales, a foremost Filipino agricultural economist, to review the recent developments in the rice subsectors, analyze the impact of globalization on the country's rice industry and evaluate the performance of the domestic rice subsector relative to food security and rice self-sufficiency objectives.

Interestingly, Dr. Gonzales noted that the failure to attain rice-self sufficiency was not a result of lack of, or the incapability of domestic rice research institutions to generate appropriate technologies, "but rather, the lack of political will, particularly expressed in adequate public funding, to support such programs." Further, the study concluded that "a rice self-sufficiency program, as a strategy to attain food security, is still relevant under the current socio-economic and political settings."

In support of a rice self-sufficiency program as a strategy to achieve the goal of food security, we enjoin our policy makers, government officials and fellow countrymen, to consider the recommendations of this study--

To shift from the centrally driven rice development programs to provincial based programs; To fully operationalize the provisions of the Agricultural and Fishenes Modernization Act (AFMA) of 1,997 to support the rice subsector; To form strategic alliances among rice stakeholders to advocate for the development of the rice subsector.

Acl:.~:~:io,L President ai&"o', il

National Academy of Science and Technology Ph1hppmes

ill

PREFACE LIST OF FIGURES LIST OF TABLES

TABLE OF CONTENTS

EXECUTIVE SUMMARY

Page

m VI

VII

1.0 INTRODUCTION 4

2.0 WORLD RICE TRENDS 7 2.1 Area, Yield and Production 7 2.2 Trade 12 2.3 Irrigation Development 16 2.4 Fertilizer Use 18 2.5 Supply-Demand Balances 19

3.0 PIDLIPPINE RICE TRENDS 26 3. 1 Area, Yield and Production 26 3 .2 Production Performance 29 3.3 Trade Performance 29 3 .4 Carrying Capacity: Rice Production 29

3.4.1 Definition 33 3.4.2 C-C Models 33 3.4.3 Extending C-C methodology: The role of technology 33

IV

Page

4.0 IMPACT OF GLOBALIZATION IN THE RICE SECTOR 42 4.1 Competitiveness of the rice industry before and after GATT-WTO 42

4.1. l Profitability analysis 42 4.1.2 Competitiveness analysis 46

4.1.2.1 Price competitiveness 46 4.1.2.2 Cost competitiveness 46

4.1.3 Rice technologies and competitiveness 51 4 .1.3 .1 Yield distribution among rice farms 51

4.1.4 Synthesis 54 4.2 Impact ofTrade Liberalization 54

4.2.1 Partial equilibrium analysis 54 4.2.2 Welfare effects of trade liberalization 55 4.2.3 Efficiency implications 58

4.3 Impact of the Asian Financial Crisis on the Rice Sector 59 4.3.1 Impact on profitability 59 4.3.2 Impact on output prices 61 4.3.3 Synthesis 61

5.0 FOOD SECURITY, RICE SELF-SUFFICIENCY POLICY, REVISITED 67 5.lDefinitions 67

5.1. l Food secunty 67 5.1.2 Self-sufficiency versus Self-reliance 67

5 .2 General Performance of Rice Sub sector 68 5.2.1 Rice programs are underfunded 68 5 .2.2 The macro and sectoral policy environment was not very

favorable to the rice sector 69 5 .2.3 High population rate of growth partly contributes

to lower per capita income 69 5.2.4 Rice technology is available but the yield gaps on farmers'

Fields and experimental farms are still large 69 5.2.5 Depletion of prime agricultural lands due to the high

demand from the commercial and industrial sectors 70 5.3 Why Rice Self-sufficiency? 70

v

Page

5.4 Rationale for a Rice Self-sufficiency Program 70 5 .4.1 The economic significance of rice 70 5.4.2 Political stability 70 5.4.3 Rice technology is in place, unfortunately the policy

Environment has not been favorable for its total adoption 71 5.4.4 Rice deficit situation is area specific, seasonal and can be

solved with devolution and participatory regional rice supply-demand management 71

5.4.5 Rice self-sufficiency program will allow us to test the effectiveness of the safety net measures promised by the government under the GATT-WTO accession 71

5.4.6 A Rice self-sufficiency program will allow us to benchmark and enhance global competitiveness in selected areas 71

5 .4. 7 The rice subsector is globally competitive under the import substitution trade regime 74

6.0 CONCLUSION AND RECOMMENDATIONS 75 6.1 Conclusion 75 6.2 Recommendations 75

6.2.1 General 75 6.2.1.1 The need for paradigm shift 75 6.2.1.2 Immediate implementation of macropolicies and

sectoral reforms 76 6.2.1.3 Strategic alliances 76

6.2.2 Specific: Key Result Areas 76 6.2.2.1 Input supply subsystem 76 6.2.2.2 Production subsystem 76 6.2 .2 .3 Marketing and distribution subsystem 77 6.2.2.4 Processing subsystem 77 6.2.2.5 Financing subsystem 77 6.2.2.6 Human resource subsystem 77

REFERENCES 78 Index 82 About the Author 85 About NAST 86

vi

LIST OF FIGURES

Figure Page

Trends in world rice production and price, 1961-98 8

2 Relationship of percent rice area, irrigated and rice of selected countries, 1985-1993 16

3 Philippine rice production and utilization, 1970-2000 30

4 Philippine rice exports and imports, 1980-2000 31

5 CS, PS and total social benefit at base year (95-97) 56

6 Projected CS, PS and total social benefit at 50% Tariff, Rate Base Year ( 1995-1997) to 2004. 57

vu

LIST OF TABLES

Table Page

1 World food production and calorie requirements, 1997 4 2 World population, 1950, with projections to 2050 5 3 The 20 largest countries ranked according to population size,

1998 with projections to 2050 5 4 World rice area, yield and production, various years 7 5 Rice production, area and yield for 25 leading producers,

in order of decreasing rice production, 1999 9 6 Rice production, area, yield and average growth rates of selected

Asian countries, 1990-1999 11 7 World rice production imports and exports (in mt), 1976-1999 12 8 Rice imports by country, 1990-99 13 9 Rice exports by country, 1990-99 14 10 World Rice Market: Changes in the Pattern of Trade, 1961-1998 15 11 Irrigated rice areas, selected asian countries, 1998 17 12 Trend in fertilizer consumption in major growing countries in Asia 18 13 Intensity of fertilizer use and productivity growth in cereals,

major growing rice countries, 1974-76 to 1990-92 19 14 Recent trends in population growth and rice production of major

rice growing countries in Asia 20 15 Production of, demand for, and net trade of rice by region,

1990 and 2020: baseline scenario 21 16 Production of, demand for, and net trade of crops in china and

southeast Asia, 1990 and 2020: baseline scenario 22 17 Rice and com area, yield, production, consumption and net imports,

Philippines, 1993-2010 24 18 Productivity growth simulations, Philippines 25

Vlll

19 Palay: production, area harvested and yield per hectare, by croptype, Philippines, 1990-2000 27

20 Growth rates of palay production, area and yield by production, environment, Philippines, 1960-2000 28

21 Rice carrying capacity in terms of subsistence level, Ilocos Norte, 1998 35 22 Rice carrying capacity in terms of subsistence level, Pangasinan, 1998 36 23 Rice carrying capacity in terms of subsistence level, Isabela, 1998 37 24 Rice carrying capacity in terms of subsistence level, Nueva Ecija, 1998 38 25 Rice carrying capacity in terms of subsistence level, Iloilo, 1998 39 26 Rice carrying capacity in terms of subsistence level, North Cotabato, 1998 40 27 Rice carrying capacity in terms of subsistence level, South Cotabato, 1998 41 28 Farm to wholesale costs and returns of irrigated rice production

by technology before GATT-WTO ( 1994-1995) and after GATT-WTO ( 1996-1997), wet season, Philippines 44

29 Farm to wholesale costs and returns of irrigated rice production by technology before GATT-WTO (1994-1995) and after GATT-WTO ( 1996-1997), dry season, Philippines 45

30 Price competitiveness of domestic irrigated rice production as imports by Season Before (Crop Year 1994-95) and After (Crop Year 1996-97) the GATT-WTO, Philippines 47

31 Price competitiveness of domestic irrigated rice production as exports by season before (crop year 1994-95) and after (crop year 1996-97) the GATT-WTO, Philippines 48

32 Competitive advantage; resource cost ratios, import substitution trade regime, before GATT-WTO ( 1994-1995) and after GATT-WTO ( 1996-1997) of irrigated rice production by technology, by season, Philippines 49

33 Competitive advantage; resource cost ratios, export trade promotion regime, before GATT-WTO (1994-1995) and after GATT-WTO ( 1996-1997) of irrigated rice production by technology, by season, ~~~ ~

34 Frequency distribution of irrigated rice respondents' average land area by yield levels and by season before and after GATT-WTO, Philippines. 52

35 Frequency distribution of non-irrigated rice respondents' land area by yield levels and by season after the GATT-WTO, Philippines. 53

36 Net efficiency losses in production and consumption at different tariff rates, base year (1995-1997) 58

ix

37 General impact of peso devaluation on farm level profitability of rice-rice farming systems by technology by cropping pattern, by season and by province 60

38 General impact of peso devaluation on wholesale level profitability of rice-rice farming systems by technology by cropping pattern, by season and by province 62

39 Comparative palay farmgate and rice wholesale prices before (crop year 1996-97) and after (crop year 1998-99) and peso devaluation by province, wet season, Philippines 63

40 Comparative palay farmgate and rice wholesale prices before (crop year 1996-97) and after (crop year 1998-99) and peso devaluation by province, dry season, Philippines 64

41 Comparative major rice input prices before (crop year 1996-97) and after (crop year 1998-99) the peso devaluation by province, wet season, Philippines 65

42 Comparative major rice input prices before (crop year 1996-97) and after (crop year 1998-99) the peso devaluation by province, dry season, Philippines 66

43 PSB and other popular rice varieties (as of June, 2000) 72 44 Rice deficits, by region and Philippines (Average 1993-1997) 73

x

EXECUTIVE SUMMARY

This paper reviewed the recent development trends in the rice subsectors; analyzed the impact of globalization on the Philippine rice industry; and evaluated the perfonnance of the domestic rice subsector relative to food security and rice self-sufficiency objectives.

The analysis showed that the failure of rice programs to attain rice self-sufficiency was not due to the absence of science or the incapability of domestic rice institutions o generate appropriate technologies, but rather, the lack of political will, particularly expressed in inadequate public funding, to support such programs.

The paper concluded that a rice self-sufficiency program, as a strategy to attain food security, is still relevant under the current socio-economic and political settings. However, in pursuing such a program, all expected costs and benefits and other alternative strategies should be clearly defined among the rice stakeholders.

Towards this end, the paper advocates the following general and specific recommendations:

General

} The need for Paradigm Shift

There is a need to shift from the centrally driven rice development programs to "provincial based programs" which are more autonomous and participatory. The LGUs are also mandated by the Local Autonomy Act to handle the food security concerns in their respective provinces. Given the archipelagic geography of the Philippines, rice self-sufficiency-food security objectives can be pursued more dynamically at the provincial level.

} Immediate Implementation of Macropolicies and Sectoral Reforms

The Agricultural and Fisheries Modernization Act (AFMA) of 1997 is not yet operationally implemented at least in funding support. AFMA can use the rice subsector as the modality in operationalizing its provisions.

";. Strategic Alliances

There is a need to form strategic alliances among rice stakeholders to advocate for the development of rice subsector. A united development stand among stakeholders can facilitate/enhance the public sector in responding more quickly to the sub sector's development needs.

Specific: Key Result Areas (KRAs)

For more specific recommendations, the rice subsector can follow the agribusiness system approach with following key result areas (KRAs)

";. Input Supply Subsystem

• Access to good seeds and genetic materials • Enhancement of input utilization and distribution • R&D commercialization especially biotechnology • Credit delivery systems

";. Production Subsystem

The strategy calls for an adequate provision of infrastructures for production

• Diversification into rice-based farming systems • Research and extension • Technology packaging and dissemination • Quality standards and premium pricing • Minimization of production losses • Private sector, farmer, LGU, SCU linkages

? Marketing and Distribution Subsystem

The major strategy is to attain a cost effective movement of goods and services in the rice sector.

• Market intelligence, information and promotion • Marketing infrastructure • All weather farm to market roads • Rice "agribusiness superhighways" • Farmers organizations • Joint ventures and strategic alliances

2

> Processing Subsystem

There is a need for increased value adding for the rice sector

• Competitive raw material cost • R&D on processing • Value added processing and product diversification • Joint ventures and strategic alliances

> Financing Subsystem

The need for effective delivery of credit

• Rural savings mobilization • Access and delivery of farm credit • Linkages with financial systems, big corporations for contract

growing • Financing modalities among farmers cooperative

> Human Resource Subsystem

Mobilizing human capital for rice and agricultural development

• Farmers' training • Entrepreneurship training • Group and cooperative management • Private sector, farmers, LGU, SCU, public sector linkages • Good program /project managers

3

1.0 INTRODUCTION

Rice is the most important food staple in the world. Together with wheat and maize, they directly supply more than 50% of all calories consumed by the world's human population. Rice human consumption, however, accounts for 85% of total rice production as compared with 60% for wheat and 25% for maize (IRRI, 1997). Rice likewise provides 21 % of global human per capita energy and 15% of per capita protein (Table 1).

Table 1. World food production and calorie requirements, 1997.

Crop Area Production Food Per ca 1itll/dav

(million ha) (million t) (million t) Calories Protein (g)

Rice(rough) 152 579 511 65% milling rate 588 11 Maize 143 585 102 80% for feed 144 3 Wheat 229 613 419 70% milling rate 558 17 Millet and sorghum 81 89 46 30% milling rate 67 2 Barley and rye 76 180 14 70% milling rate 19 0.4 (excluding beer) Oats 16 32 3 65% milling rate 3 0.1 Potato 19 302 168 60% for feed 53 1.3 sweet p;>tato and yams 13 158 87 50% for feed 40 0.4

Subtotal 1,472 35 All foods 2,782 74

Source: FAO, 2000

Global population is projected to reach 9.4 billion by2050 (Table 2). Asia accounts for 60% of global population with India, China and Pakistan topping the projections (Table 3). About 92% of world rice production and 90% of global rice consumption occur in the region. Rice, therefore, occupies a center stage in the lives of the rice­eating world, most especially, Asia.

4

T bl 2 W Id a e or I . 1950 . h popu at10n, , wit protections to 2050

Year World Population Half-Century Increase

(billion)

1950 2.5

2000 6.1

2050 9.4

Source: Postel, (1998) as cited by Brown, et al (1998)

Table 3. The 20 largest countries ranked according to population size, 1998, with projections to 2050.

1998 2050

3.6

3.3

Rank Country Population Country Population (million) (million)

I China 1,255 India 1,533 2 India 976 China 1,517 3 United States 274 Pakistan 357 4 Indonesia 207 United States 348 5 Brazil 165 Nigeria 339 6 Pakistan 148 Indonesia 318 7 Russia 147 Brazil 243 8 Japan 126 Bangladesh 218 9 Bangladesh 124 Ethiopia 213 10 Nigeria 122 Iran 170 11 Mexico 96 The Congo 165 12 Germany 82 Mexico 154 13 Viet Nam 78 Philippines 131 14 Iran 73 Viet Nam 130 15 Philippines 72 Egypt 115 16 Egypt 66 Russia 114 17 Turkey 64 Japan llO 18 Ethiopia 62 Turkey 98 19 Thailand 60 South Africa 91 20 France 59 Tanzania 89

Source: United Nations, World Populations Prospects 1996.

5

In the Philippines, rice dominates Philippine agriculture. Rice, the major staple is likewise a political commodity. Rice domestic availability is correlated to political stability, hence to national security. The issue therefore on rice self sufficiency is not only an economic but also both political and national security issue under Philippine setting.

The ma JOT objective of this paper is to analyze the Philippine rice self-sufficiency issue under the cuJTent domestic and global economic setting. More specifically, the paper intends to:

a) review and analyze world and Philippine rice trends; b) analyze the impact of globalization on the rice sector: c) provide some of the rationale for rice self sufficiency programs: and d) recommend policies to enhance the global competitiveness of the rice sector.

6

2.0 WORLD RICE TRENDS 1

2.1 Area, Yield and Production

World rice trends in area, yield, and production from 1948 to 1998 are shown in Table 4. Total world paddy production increased from 145 million mt in 1948 to 579 million mt in 1998 exhibiting an annual growth rate of 6%. Average yields, on the other hand, increased at an annual rate of2.5% from a low of 1.68 mt/ha to 3.81 mt/ha during the end of the period. Finally, area planted to rice also reached 152 million hectares in 1998.

Table 4. World rice area, yield and production, various years.

Year Arable land + Rough Rice per01anentcropsa Area % of all Yield Production

('000 ha) ('000 ha) arable land (01t/ha) ('000 mt)

1948 1,232,000 86,700 7.0 1.68 145,400 1953 1,332,000 109,025 8.2 1.82 197,906 1958 1,390,000 117,017 8.4 1.92 224,093 1963 1,350,303 120,277 8.9 2.05 247,123 1968 1,371,924 129,450 9.4 2.23 288,692 1973 1,392,756 136,824 9.8 2.45 334,964 1978 1,420,351 143,543 10.1 2.68 384,988 1983 1,432,735 143,085 10.0 3.14 449,018 1988 1,453,910 146,321 10.1 3.34 488,604 1993 1,447,509 147,322 10.2 3.53 519,407 1994 1,501,963 147,250 9.8 3.66 538.741 1995 1,505,069 149,776 10.0 3.66 548J67 1996 1,508,746 150,263 10.0 3.78 568.226 1997 1,510,442 152,176 10.1 3.80 578.919 1998 1,511,766 151,998 10.1 3.81 578.769

This column reports land in both temporary and permanent crops Source: FAO Production Yearbook, 1952; World Crop and Livestock Statistics, 1948-1985; FAO 2001

'Updated from an earlier work of Gonzales, 1997.

7

Although world rice production exhibited upward trends, rice prices were very volatile. From 1961 to 1995, rice prices in real terms had peaked three times. One was in 1973 when world rice price reached close to US$ l, 700/mt. This was followed after 10 years when rice price almost averaged to US$700/mt. In real terms, prices slipped to above US$200/mt in 1986 but increased to US$300/mt in 1998 (Figure 1 ).

~ ~ = c s E '-~ ~ ·c

"C

~ ·5 = = .... c

= .9 ..... ~ = "C 0 ... ~

Figure 1. Trends in world rice production and price, 1961-98.

700 ~----------------~ 1800

600 1500

500 1200

400

900

300

600 200 Rice Price

100 300

0 0

1961 1965 1969 1973 1977 1981 1985 1989 1993 1998

Year Sources: Rice Production: FAOSTAT Electronic Database, January 1999; World Bank Quarterly Review of Commodity Markets Rice Price: Relate to Thai rice 5%-broken deflated by G-5 MUV Index deflator. From: Hossain, 1999

8

,-fA r.r; ~ QO

°' °' ,.... '-

"' ~ ~

•t: Q. ~ ~

~

The major rice producers are shown in Table 5. More than 90% of the world production and area planted to rice come from the Asian region. China had the highest rough rice production of 20lmillion mt in 1999, comprising 34% of world total rice production. India, which had the highest percentage in area planted to rice (around 28%), placed second at 128 million mt, or around 22% of total world rice production. The major factor that spelled out the difference in production between these two countries was yield levels - 6. 3 mt/ha for China and 3 .0 mt/ha for India. The other top ten producing countries include Indonesia, Bangladesh, Vietnam, Myanmar, Thailand, Japan, Brazil, and the Philippines.

Table 5. Rice production, area and yield for 25 leading producers, in order of decreasing rice production, 1999.

Rough rice Rice area Arable land • Arable land % of world rice Country production ('000 ha) ('000 ha) in rice(%) Area Production

('000 t) (t/ha)

China 200,719 31,726 124,053 26 20.7 34. 1 India 127,600 43,000 162,300 26 28.1 21.7 Indonesia 49,500 11,500 17,130 67 7.5 8.4 Bangladesh 29,857 10,470 7,828 134 6.8 5. 1 Vietnam 28,116 7,325 5,509 133 4.8 4.8 Thailand 23,000 10,300 17,085 60 6.7 39 Myanmar 17,848 5,600 9,540 59 3.7 30 Brazil 11,446 3,668 53,500 7 2.4 1.9 Japan 11,300 1,800 3,970 45 1.2 1.9 Philippines 11,200 3,900 5,120 76 2.5 1.9 United States 9,603 1,445 !76,950 I 0.9 1.6 Pakistan 6,900 2,400 21,034 11 1.6 1.2 Korea, Rep. 6,851 1,050 1,787 59 0.7 1.2 Egypt 5,900 695 2,817 25 0.5 1.0 Cambodia 3,800 1,961 3,700 53 1.3 0.6 Nepal 3,710 1,520 2,898 52 1.0 0.6 Nigeria 3,397 2,050 30,371 7 1.3 0.6 Sri Lanka 2,692 829 866 96 0.5 0.5 Madagascar 2,637 1,210 2,565 47 0.8 0.4 Korea DPR 2,343 580 1,700 34 0.4 0.4 Iran 2,300 550 17,388 3 0.4 0.4 Lao PDR 2,064 750 800 94 0.5 0.4 Colombia 2,059 430 1,929 22 OJ OJ Malaysia 1,940 645 1,820 35 0.4 0.3 Peru 1,605 290 3,690 8 0.2 0.3

World total 588,767 153,177 1,379,114 II 100.0 100.0

Yield (t/ha)

6.3 3.0 43 2.9 3.8 2.2 3.2 3. I 63 2.9 6.6 2.9 6.5 8.5 1.9 2.4 1.7 3.2 2.2 4.0 4.2 2.8 4.8 3.0 5.5

3.8

'Arable lands refer to land under temporary crops (double crop areas arc counted only once), temporary meadows fro mowing or pasture, land under market or kitchen gardens, and land temporarily fallow or lying

idle. The figures are for 1997. Countries such as Bangladesh, where multiple rice crops are harvested from the same plot of land each year, the figure may exceed I 00%. Source: FAO, 2000

9

In terms of growth performance of area, production and yield, Table 6 shows the trend for selected countries from 1990 to 1999. Seemingly, China, Japan and Brazil have reached their rice area frontiers as shown by their declining growth rates m area planted. Myanmar, Philippines, Vietnam, Thailand and to some extent Indonesia (outside Java) still have some room for expansion in area planted to rice as manifested by their annual growth rates ranging from 1.39% to 2.82%. In Asia, Vietnam had the highest annual positive growth rate in production of 4.66% that is a combined effect of area expansion and yield improvements.

10

Table 6. Rice orea, production, yield and average growth rates of selected Asian countries, 1990-1999.

Country

BnngJade~·h

Area1·000 ha)

Production ('000 t)

Yield(tlh.i)

Brad/

Area('OOOha)

Production ('0001}

Yield( t/ha)

Myanmar

Area('OOOha)

Production ('000 t)

Yield(tiha)

lndla

Arca ('000 ha)

Production ('000 tl

Y1eldl. ~'ha)

lndone~·ia

Area ('OOOha)

Production ('0001)

Y1eld(tlhil)

Japan

Area(OOOha)

Production ('000 t)

Yield( ~"ha)

Philippines

Area ('000 ha)

Production ('000 t}

Yield( ~1ha)

Thailand

Arca('OOOha)

Production('OOOt)

Yield( L~a)

Vietnam

Area ('OOOha)

Production ('OOOt)

Yield( t/l .. 1'

Chinn

Area ('000 ha)

Production ('OOOt}

Yield( t/ha)

Ave. Growth 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Rate

10,435 10,245 10,178 10,900 9,919

25.312

2.55

9,952

26,398

2.65

10,020 10.177 10,263 10,470 0 36

26,778 27,377 27.510 28,000 28,184 28.183 28,293 29,857 I 20

2.57 2.67 2.7 2.57 2.81 2.77 2.76 2.85 0.87

3,947

7.421

1.88

4,122

9,488

2.3

4,760 4,575

13,966 ll,199

2.93 2.89

4,687

10,006

2.13

5,056

14,835

2.93

4,431

10,193

2.3

5,794

17,434

3.01

4,421

10.500

2.38

5,743

18,199

J.17

4.376

11,226

2.57

6,033

17,9;7

2.98

3,917

9,990

2.55

5,545

17,835

3.22

3.572

9.290

2.6

5.768

17.673

3.06

2,927

7,658

2.62

5.408

16,651

3.08

3,668

11,446

3.12

5,600

17,848

l.19

42,687 42,308 41,388 41.200 42,814 42,910 43,280 43.420 44,478 43.000

111,517 110,591 108,845 111,011 122,640 115,735 120,828 123,388 127,045 127.600

2.61 2.61 2.63 2.69 2.86 27 2 97 2 84 2.86 2 97

10,502 10,282 11,103 10,932

45,179 44,688 48.240 47,885

4.3 4.35 4.34 4.38

2.074

ll,124

6.33

3,319

9,319

2.81

8,792

17,193

1.96

6,028

19,225

l.19

2,049

12,005

5.86

3,425

9,673

2.82

2,106

ll,216

6.28

l,198

9,129

2.85

9,271 9,558

19,810 20,180

2.14 2.11

2,139

9,793

4.58

3,450

9,530

2.76

8.972

19,090

2.13

6J03 6,475 6,466

19,622 21,590 22,300

3.11 3.33 3.45

10,744

46,642

4.35

2.212

14,476

6.77

3,759

I0,541

2.8

9,105

21.111

2.32

6,599

23,528

3.57

11,439

49,744

4.35

2.118

\3,435

6.34

3,951

11,284

2.86

9,099

22,016

l.42

6.766

24,964

}.69

11,570 11.141 11,6\3 11.500

51,102 49,377 48,472 49,500

442 443 4.17 4.3

1,977

12,930

6.54

3,839

11,365

2.96

9,267

22.ll2

241

7,004

26,397

J.953 1.801 1,800

12.531 11,200 11.lOO

642 6.22 6 28

3,842 J,170 3.900

11,269 10,236 11,200

2.93 3.23 2 87

9,932 10.000 JD.JOO

23.580 22.506 23,000

2 37 2.25 2 23

7,100 7,362 7.325

27,524 29.142 28,! 16

3 88 3.96 ~ 34

_1\519 33,019 32,469 31,403 30.537 31,!07 31,7:54 .\2.129 31.578 31.726

191,589 186,0~6 188,255 JB?,211 178,031 187,334 197,073 202.809 200.792 200,7!9

5.72 5.64 5.8 5.96 5.83 6.02 6.21 6 31 6.36 6.33

11

-0.63

389

4.14

2.82

4.10

l.l4

OB

I 90

1.74

149

IJ6

·0.11

-1.52

103

2.59

226

2.07

038

1.39

2 00

0 59

191

466

2 iO

-048

10-0

147

Table 7. World rice production, imports and exports

(in mt), 1976-1999.

Year Production

1976 227,737,250

1977 240,884,800

1978 244,691,200

1979 246,879,100

1980 259,856,350

1981 268,960,250

1982 267,733,050

1983 292,387,550

1984 305,473,350

1985 302,841,500

1986 309,096,450

1987 295,308,000

1988 314,252,900

1989 329,089,150

1990 337,030,200

1991 337,914,850

1992 341,558,750

1993 342,818,450

1994 347,555,650

1995 . 548, 166,854

1996 568,255,953

1997 578,919,111

1998 575,938.394

1999 606,656Jl25

Source: World Rice Statistics, 1993-94

FAO, 2001

Exports Share(%)

8,992,618 3.95

10,870,095 4.51

9,745,548 3.98

11,776,677 4.77

13,083,825 5.04

13,414,704 4.99

12,146,510 4.54

11,591, 135 3.96

12,518,006 4.10

11, 186,320 3 69

12,609,510 4 08

12,539,890 4.25

11,994,180 3.82

15,306,670 4.65

12,221,990 3.63

12,817,220 3.79

16,078,650 4.71

16,558,510 4.83

17,508,510 5.04

22,508,615 4.11

20,352,880 3.58

20,861,304 3.60

28,605,412 4.97

25,986.434 4.28

12

Imports Share(%)

9,234,909 4.06

10,090,242 4.19

10,304,003 4.21

12,159,788 4.93

12,901,241 4.96

13,610,485 5.06

11,535,426 4.31

12,116,929 4.14

11,749,757 3.85

12,351,310 4 08

12,645,580 4.09

12,100,750 4.10

12,310,590 3.92

14,295,420 4.34

12,208,780 3.62

12,592,410 3.73

14,831,510 4.34

15,408,810 4.49

17,216,080 4.95

21,644,203 3.95

21,710,493 3.82

18,836,798 3.25

27,040,348 4.70

26,081,157 4.30

Table 8. Rice imports by ~ountry, 1990-99.

COUNTRY

AFRICA

Nigeria Senegal South Africa

N.CAME:.RJCA

c-ada Cuba Haiti Jamaica Mexico Trinidad and Tobago USA

S. AMERICA

Brazil Peru

ASIA

Indonesia Iran Iraq Korea Rep. Malaysia Saudi Anthia China

Vietnam

EUROPE

Belgium-lux. France Uennillly

Italy UK

OCEANIA

1990

250,000 391,510 306.430

159,970 235,000 114.000 61,090 150,670 33,440 148,270

403,630

206,040

49,580 620,000 380,000

1.740 330,,70 280,_,60

62,530 1,900

206,620

125,760

ll.700 51,070

2J8.440

1991

250,000 394, 100 375,040

169,240 260,000 112,000 58,100 104.000 22,()60

161,260

728,400 223,080

170,990

525,000 250,000

3,460 400,290 280,000 145.450 6,000

201.260 292.460

49,770 264,130

Fiji 20.1·rn 17,600

Papua New Gume<1 120,000 180,000

Russiillt Federation '19.770 409.700

TOTAL IMPORTS 12,ZZl,990 IZ,817,220

• - lop six unportcrs

So•rc:e: World Ric:e SC•listiu. 1993.94 FAO. 2001

1992

350,000 379,960 362,080

186,030 300,000 140,000 73,630

248,970 27,340 175,250

583,900 221,500

6-09,770 943,840 450,000

1,260 444.180 489,970 106,570

1.700

193,480 305,560 274,850 32.770

282,680

32.240 150,000

1993

350,000 362,750 385,450

198,130 370,000 150,000 80,970

274,700 29,770

203,060

700,720 308,450

24,320 1,158,510 655.000

890 389,200 576,560 99,750

750

198,740 268,420 235,770 50,610 22.680

32.760 120.000

16,558,510

, ... 350,000 348,380 430,600

197,370 255,000 140,000 66,990 296,840 31,570

246.710

987,120 239,740

630,070 475,000 200,000

1,070 340,730 433,570 517,070 11,000

211,650 285,560 263,110 47,130

342,240

26,630 140,000

47.595

17,-IK.5]0

1995

(in mt)

300,000 441,205 466,154

224,473

350,000 208,000 104,677 246,432 41.109

224,.338

870,506 196,508

3,157,700 1,633,000 225,000

731 427.556 522,942

1,645,837

215,481 280,993

228.864 58,383

297,484

27,000

135,000

145,667

1996

345,500 559,233 482,333

234,951 389.500 175,000 78,705

324,281 '19,963

275,394

792.463 460,695

2,149,757

1.150.000 214.000 121.550 577,634 721.276 765.132

0

278,534 290,708 271,152 49,777

359,715

31,300

212.215

369.474

Zl,710,493

1997

731,000 402,010 580,180

272.672 334,000

183,000 85.000

310,489

29,473 361,654

816,116 280,970

348,075 637,498 684,000 24,052

639.612 705,054 330,393

0

235,856 370,358

244.835 78,314 390,658

23.000 203,403

328.950

18,836,791

1991

1,000,000 557,066 519,636

258,675 375.000 165,000 88,000

291,775 37,327

278,592

1,304,958 256,831

1,894,958 2,000,000 1,000.000 61,618 657,870

1,000,756 246,892

203,625 379,973 234,008 60,908 375,440

23,000 165,000

264,995

17,04@.348

1999

687,925 625,160 515,234

262,349 267,200 232,000 89,800

405,023 39,215

353,644

984,265 149,630

4,748,060 852.000 781.000 155,818 612,467 279,000 524,706

5,200

212.546 394,092

254,710

66,212 435,804

35.300 165,235

558.04-8

26,081 157

AVERAGE

461,443 446,137 442.314

216,386 313,570 161.900 78,696

265,318 35,127

242,817

817,208 254,344

1.378.328 999,485 483,900 37,219 481,991 528,949 444,433

2,655

215,779 299,388 225,667 54,494

302,927

26,958 159,085

305,525

¥.SHARE

2.42 2.34 2.32

1.1 .. 1.65 0.85 0.41 J.39 0.18 1.27

4.29. J.34

7.24 * 5.25 * 2.54 • 0.20 2.53 • 2.18 • 2.33 O.Ol

J.13 I.57 ].18

0.29 1.59

0.14 0.84

1.60

JOO

Table 9. Rice exports by country, 1990-1999.

COUNTRY 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ,\\'ERAGE ~.SHARE

(inmt)

Aj'i'ic·a

Egypt 75.720 l59,000 187,470 144,120 247,180 156,787 327.884 202,604 428.925 306.977 l 86.745 1.2

N. C Americ:a

Costa Rica 560 1.900 350 4.664 7,109 12,348 8,446 10.272 S.8S5 0.04

United States 2.4 73,950 2,242,950 2, 164.460 2,679,730 2,s21, ·no 3,083,609 2,M0,356 2,296.001 3.112,693 2,668.066 2,618,355 17.4 *

S. Amcrit:a

Argentina 75.230 70,000 180.980 263.440 217,120 390,091 259,394 539,945 547,281 659.480 244,375 1.6

Urugliay 290,430 270, \ 70 328.130 505,220 407,620 462.471 603,258 648,878 659. 192 699,044 487,441 3.2

Surinanie 64,940 84.000 7 .... ,450 65,000 77.000 79 .. U9 88,530 110,387 34,100 71.300 74.804 0.5

Asia

China 404.380 81,750 1,034.240 1,506,990 1,630,310 235.934 356,854 1,009,916 3.791.615 2.826,605 l.287,859 8.6 * - India 505,0.'\0 450.000 580.400 767,680 891.420 4,913, 156 2.511,974 2, 133.554 4.800,000 2.571,000 2.012.421 13.4 ,., .j>.

Pakistan 743.890 1,204,580 I.SI 1.840 1.032.130 984.330 1.852,26 7 1,600.524 1,76"1,206 1,971.601 1.791.193 l.211,.H7 8.1 . Thailand 4,017.080 433,307 5.151,370 4,989,220 4,858,630 6,197,990 5,454,350 5,567,184 6.356,000 6,838,900 4,986,403 33.2 * Victnarn 103,300 194.580 176,450 1,983,000 I ,988,000 3,500,000 3,574,804 3JIOO.OOO 4,600.000 1.268.583 8.4 *

EurtJpe

Belgium 123,700 11:5,800 135.920 126,660 152.540 158.094 190,233 135.258 123,193 122.963 131.264 0.9

France 43,830 56.880 70,640 85.200 67,820 74,373 74,180 79,695 61.455 74.942 66,552 0.4

Italy 576,950 644, 130 739.450 574,220 619,360 523.898 608.277 632.398 601.597 667,367 636.913 4.2

Netherland::; 87,460 85,500 84.090 98,670 132.070 96,885 113,420 130.895 137.008 126.430 102,370 0.7

United Kingdom 5.660 9,090 13.650 19.900 33,630 22.811 27,646 30.079 32,747 31.762 18,949 0.1

Oceania

Australid 177,690 219, 100 518.670 481,620 584.920 541,848 566,508 654,603 'l5 l.775 668,SQI 441,765 2.9

Ru:s.~i1111 Federaritln 34,580 20.000 92,79_"' 90,727 ~2.897 11.410 11.035 4,764 19,781 0.1

TOTAL 12,221,990 11,817,220 16,078.650 16,558,510 17,508,510 22,508.615 10,352-,880 20,861,304 28,&05,-'12 26,081,157 15,036,976 JfJ0.0

• - top sh. rice exporters

Source: Wc>rld RkeSt2tistics, 1993~94

FAO, 2001

Since the Asian region is the major producer and consumer of rice, it is interesting to examine the pattern of rice trade in the region. In 1961, Asia shared 71 % of total rice exports and 73% of rice imports. However, in 1992, the region shared 68% of rice exports and only 39% of rice imports. Rice exports from Asia have further increased to 74.5% in 1998 and its share of imports rose to 56% (Table 10).

Table 10. World rice market: Changes in the pattern of trade, 1961-1998.

Region 1961

Asia: 71.4

East Asia 8.7

Southeast Asia 55.5

South Asia 6.8

Middle East 0.4

Africa 4.6

Latin America 4.8

Hig;h Income Countries 19.2

Volume ofTrade 6.8

(mlllion tons of milled rice)

Source: JRRI. World Rice Statistics. 1993-1994

FA0, 2000

Share or Exnorts 1992 1998

68.1 74.5

6.9 4.7

46.8 31.3

13.l 23.7

1.3 14.9

1.3 1.6

5.0 6.2

25.6 23.0

15 8 28.6

15

Share or lm1iorts 1961 1992 1998

72.9 38.8 56.0

10.3 4.0 6.5

32.l 9.5 15.3

25.8 2.8 10.7

4.7 22 5 24.4

8.0 24.8 17.5

5.6 13.2 12.8

13.5 23.2 24.6

6.7 15.2 270

The most notable change in the pattern of trade was in South and Southeast Asia which maintained their 60% share of exports during the years 1961 and 1992 but substantially reduced their aggregate share of imports of 58% in 1961 to only 12% in 1992 (Table 10). This tremendous trade performance was attributed by some policy analysts to the success of the rice Green Revolution in South and Southeast Asia . However, this trend has tapered off in 1998. In the mid 1990s, this favorable rice balance for the region was marked by Vietnam's becoming a major rice exporter during the crop year 1995 to 1996. It is predicted that Vietriam will become the major exporter of rice that may even replace Thailand in the years ahead.

2.3 Irrigation Development

Irrigation water is a major input to rice production. Water aYailability reduces the risk of agribusiness investment in rice. Researches have shown the high positive correlation between yield and the percentage of area irrigated among rice producing countries (Figure 2). The higher the level of irrigation development, the higher the yield.

Irrigated rice areas for selected Asian countries in 1997 are shown in Table 11 . Almost all rice areas in Pakistan, Nepal and Japan are irrigated. The Republic of Korea, Sri Lanka and Thailand have 0.50 to 0.87% of irrigated rice to total rice area. The others, including the Philippines, have irrigated areas less than 45% of total rice area .

4

0

•

Figure 2. Relationship of percent rice area, irrigated and rice of selected countries, 1985-1993

• ~ea. Rep

lndones:ia

•

Myanmar • • lfld~ Phi l ip~inas • 3ang;adt!sh • Nepal • • -hail and

20 40 60 80 100

Rice Area lrrieated (% )

16

Japan

120

Table 11. Irrigated rice areas, selected Asian countries, 1998.

Country Irrigated area I Total rice area % of Effective

(000 hectares) area irrigated

Bangladesh 3,844 10,113 38

China 52,582 31,572 167

India 59,000 44,598 132

Indonesia 4,815 11,716 41

Japan 2,679 1,801 149

Korea, Rep 1,159 1,056 110

Myanmar 1,592 5,459 29

Nepal 1,135 1,506 75

Pakistan 18,000 2,424 743

Philippines 1,550 3,170 49

Sri Lanka 651 820 79

Thailand 4,749 9,900 48

Vietnam 3,000 7,364 41

Source: FAO, 2001

17

2.4 Fertilizer Use

Fertilizer, together with high yielding rice varieties. and good irrigation water management were the major factors that contributed to the success of the Green Revolution in the 1970s and 1980s. In absolute terms, China and India were the major users of fertilizer nutrients reaching 29 million mt and 12 million mt, respectively, in 1992. For most rice producing countries in Asia, annual growth rates of fertilizer use were in double digits during the period 1965 to 1978. This included China, India, Indonesia, Bangladesh, Thailand, Vietnam, and Myanmar. This surge in fertilizer use generally continued in the late 1970s until the late 1980s, with a slightly lower annual growth rates that eventually slowed down in the early 1990s. However, four countries deviated from this pattern. Vietnam's annual rate of fertilizer use had accelerated to double digit even in the early 1990s; Myanmar's pattern of fertilizer adoption rate started to decline in the late 1980s and continued to decline at an accelerated rate during the early 1990s; Japan had almost saturated its fertilizer utilization as early as the mid 1960s so logically fertilizer nutrients showed declining trends; and the Philippines use offertilizer nutrients had also declined in the early 1990s (Table 12).

Table 12. Trend in fertilizer consumption in major growing countries in Asia.

I\ utrient consumption Rates or growth Country (in 000 metric tons) (Percent/year)

1965 1978 1992 1965-78 1978-88

China 2,604 10,871 29,155 11.6 8.8

India 785 5.131 12,218 15.6 8

Indonesia 95 763 2,580 174 12. I

BanglaJesh 54 356 998 15.6 8

Thailand 34 288 1,095 17.9 10.8

Vietnam 78 341 902 12 4.7

Myanmar 9 86 69 18.9 -03

Japan 1,852 2.221 1.784 1.4 -1.3

Philippines 113 312 4% 8.1 4.9

Korea, Rep. 336 871 964 7.6 0.6

Source: F AO Agrostat database as presented b~' Hossain and Singh, 1995

18

In terms of yield response to fertilizer use from 1974 to 1992, Vietnam had the highest intensity offertilizer response of 15 kg of paddy per kg off ertilizer nutrients. Indonesia, Bangladesh, the Philippines, China, and India had identical responses of I 0 to 12 kg range for every kg of fertilizer nutrient use (Table 13).

Table 13. Intensity of fertilizer use and productivity growth in cereals, major

growing rice countries, 1974-76 to 1990-92.

Nutrient Consumption Yield rates Country (kr'ha) (kl ha)

Yield response to fertilizer use

1974-76 1990-92 1974-76 1990-92 (kg/kg of nutrients)

China 43.7 2119 2,477 4,347 111

India 24.7 99.l 1,179 1,948 103

Indonesia 35.1 149.2 2,353 3,826 12.9

Bangladesh 18.0 83.8 1,770 2,574 12.2

Thailand 11.9 49.0 1.890 2,159 7J

Vietnam 433 108.5 2,141 3,100 14.7

Japan 240.6 265.0 5,619 5,714 3.9

Philippines 21. l 82.4 1,289 2,041 123

Korea, Rep 201.9 361.6 4,448 5,884 9.0

Pakistan 37.7 76. l 1,389 1,818 5.7

Source: FAO Agrostal databa.e as presenled by Hossain and Singh, 1995

2.5 Supply-Demand Balances

Several structural changes have occurred in the global economy since the early 70s that affected the supply-demand balances of food. For rice in particular, technological advances in production technologies such as the high yielding varieties and hybrids, information technology and improved infrastructures have affected the supply side of rice. These breakthroughs resulted in higher production levels and higher market surplus for export. Occasional surpluses have resulted into lower prices. Thus, the general market response of rice growing countries where rice surpluses have taken place was to go into diversified croppings and general commercialization of agriculture.

On the demand side, consumers ' incomes have improved over the past thirty years enabling rice eaters to have more diversified choices of food. As incomes rise, lifestyles generally change demanding different types of food.

19

Demand studies have shovm that as early as 1989, Ito et al (1989) had suggested that rice in Asia would become an inferior good. This was supported by their empirical observations that during this period, per capita consumption has declined in Japan, South Korea, Taiwan, Singapore, Malaysia, and Thailand as incomes in these countries rose.

In 1994, Tan et al (1995) estimated negative income elasticity for rice in China. Chinese diets have changed due to rapid urbanization or emigration from rural to urban areas. Another observation posed by Huang and David (1993) for the declining consumption of rice in China was the easier access to alternative foods (e.g. wheat based noodles, bread) ready to serve meals, and dairy products.

Aside from income changes, population growth has affected supply-demand balance in two ways -pressure on the carrying capacity of the land resource and higher growth rate of population than the growth in production.

Recent trends in population growth and rice production in major rice growing countries in Asia indicate that during the 1985 to 1993 period, only the rice production growth rates of Vietnam, Indonesia, Bangladesh, and India were higher than the yearly growth rates of their population. The population rates of growth of China, Thailand, Myanmar, Japan, the Philippines, and Republic of Korea outstripped their growth in rice production (Table 14).

Table 14. Recent trends in population growth and rice production of major

rice growing countries in Asia.

Rice Population Growth in rice

Country harvested growth production (0/., year)

(mill1011 ha) 1980-1990 1975-1985 1985-1993

China 32.4 IJ 12 0.9

India 41.4 2.1 24 2.7

Indonesia 10.9 1.7 5.5 2.7

Bangladesh 10.2 2.2 2.3 2.9

Vietnam 1).5 2.1 3.6 4.3

Thailand 9.0 1.9 3.0 0.0

Myanmar 5.1 2.1 4.1) 0.9

.Japan 2.1 0.6 -1.0 -3.2

Philippines 3.2 2.4 3.5 1.3

Korea. Rep l.l l.2 l.8 -1.6

Source: FAO Agrostat data base and Hossain, 1996

20

The projected world supply demand balance for rice and cereals by regional grouping is shown in Table 15.

Using 1990 as the base period, the study of the International Food Policy Research Institute (Rose grant et al, 1995) projected that the world would require in 2020 some 566 million mt of rice to satisfy demand. Rice supply sources will come from Asia which is seen to eliminate its supply deficit of 27 million mt in 1990 to achieve a marketable trade surplus of 13.0 million mt in 2020. The deficit regions include Africa and Latin America.

The world demand for total cereals (wheat, maize, rice, other coarse grains) by 2020 was projected at 2,679 million mt or five times that of rice. The developed countries are projected to be the major suppliers of this cereal demand, with the developing countries of Asia and North Africa as the major cereal importers (Table 15).

Table 15. Production of, demand for, and net trade of1 rice by region, 1990 and 2020: Baseline scenario.

1990 2020

Commoditv/Re•ion Production Demand Net trade Production Oemand Net tradr

RICE

World 530,713 530,715 0 566, 150 566. 151 0

Developed countries 303,786 24 1,1 86 62,602 22,534 20.135 2,399

Developing countries 226.927 289,529 ·62,602 543,616 546,016 ·2.39Q

Asia 157.882 184.913 ·27,03 1 508.452 495.332 13,11 9

Latin America and the Caribbean 22,013 25,601 ·3,588 17.041 20,625 ·3,584

Sub-Saharan Africa 1,718 6.869 ·5 .151 11 ,495 18,3 19 ·6,82)

West Asia and North Africa 45.3 14 72.146 ·-26,832 6,628 11.639 -5.0 12

CEREALS

World 1.714,780 1,714,492 0 2,678.825 2,678.827 0

Developed countries 847,875 756,658 12,373 1,134.1 71 945,935 188.236

Developing countries 866,905 957,834 ·12,373 i,544,654 1,732.892 · 188,236

Asia 636,443 662,974 -755 1,082,273 1,160,798 -78,525

Latin America and the Caribbean 99,407 1112,715 -3,715 172,632 187,618 -14.996

Sub-Saharan Africa 54.580 63,862 -1,092 132.256 158.351 -26,095

West Asia and North Africa 76,473 118.214 -6,795 157,492 225.968 -68.476

Sour«' lfPRl. t995

21

For the supply-demand balances of rice and other cereals for China and Southeast Asia, the simulated projections are shovm in Table 16. The results of the simulation showed that by 2020, China and Southeast Asian countries will be net importers of wheat (35.6 million mt); net exporters ofrice (14.0 million mt.); net importers of maize (8.0 million mt); net importers of coarse grains (1.6 million mt); and net importers of total cereals (28.1 million mt).

Table 16. Production of, demand for, and net trade of crops in China and Southeast Asia, 1990 and 2020: Baseline scenario.

1990 CROP COUNTRY Production Demand Net trade I Production

(thousand metric tons)

RICE China 130,631 11g,8u -243 170,547 Southeast Asia 71,168 67,5'4 4,674 117,647

Indonesia 29,163 2Q,262 -99 51,872 Malaysia 1,200 1,668 -468 1,945 Philippines 6,050 6,388 -338 12,023 Thailand 12,667 8,476 4,191 17,081

Other Southeast 23,188 21,800 1,388 44.727 Asian Countries

WHEAT China 91,1.16 106,106 -14,950 158,604 Solltheast Asia 116 4,695 -4,569 170

Indonesia 1,791 -1,791 Malaysia 701 -701 Philippines !,437 -1,437 Thailand 295 -295

Other Southeast 126 471 .345 170 Asian Countries

MAIZE China 85,350 83,518 1,832 155,131 Southeast Asia 16,441 16,691 -150 18,365

Indonesia 6,445 6,449 -4 ll,520 Malaysia 35 1,340 -1,305 68 Philippines 4,677 4,787 -110 8,203 Thailand 4,263 J,057 1,026 6,759

Other Southeast 1,021 1,058 -37 1,814 Asian Countries

OTHER COARSE China 17,383 17,118 1,831 24,896 GRAINS Southeast A5ia 645 781 -IJ6 851

Indonesia J JO -27 5 Malaysia 72 -72 Philippines 251 -251 Thailand 250 244 6 307

Other Southeast 392 184 208 539 Asian Countries

TOTAL CEREALS China 324,610 3.17,816 -13,/96 509,178 Southeast A.sia 89,480 89,761 .]81 1.17,033

Indonesia 35,611 .17,532 -1,921 63,397 Malaysia 1,235 J,781 -2,546 2,01) Philippines 10,727 12,863 -2.136 20,226 Thailand 17,180 12,072 5.108 24,147

Other Southeast 24,727 23,513 1.214 Asian Countnes

Source: Roaegrant et al (1995) IFPRI

22

2020 Demand Net trade

168,054 2,493 116,125 11,512 51,806 66 2,283 -338 11,491 532 9,783 7,298 40.76] J,904

184,407 -15,803 9,997 -9,817 l,587 .J.587 1,619 -1,619 J,261 .J,261 565 -565 965 .795

156,450 -1,219 35,200 -6,835 11,689 -169 J,243 .J,175 9,271 -1,068 8,864 -2,105

2,134 -320

21,609 1,187 1,571 -711

35 -JO 161 -161 360 -360 602 -295 413 126

531,520 -21,Ul 162,894 -5,861 67,117 -.1.720 7.)06 -5,293

24,383 -4.157 19,814 4,JJJ 44,275 2.975

For the Philippines, in particular, the negative rice trade balance of338,000 mt in 1990 was projected to be eliminated. Instead a surplus of 532 thousand mt is expected to be attained in 2020. The Philippines, on the other hand, will be importing wheat at around 3.3 million mt; maize withm the vicinity of 1,068 thousand mt; and total cereal imports to satisfy local demand by 2020 will reach 4.2 million mt 2 (Table 16).

An alternative projection for Philippine rice supply-demand balances was done by David and Balisacan ( 1995). Their base simulation had the following assumptions:

1. Average aggregate income of 3 .0% for both urban and rural areas; 2. Population growth of 1.9% a year for rural and 2.9% for urban areas; 3. Constant real prices of food commodities; 4. An annual mcrease of 1 % in area planted to rice MY s and an annual increase of

0.5% in irrigated paddy area; and 5. An annual increase of 3 .0% in area planted to high yielding maize varieties.

Base simulation results of David and Balisacan 1995 projections for rice and maize are shown in Table 17. Under the base simulation, rice and maize imports are projected to reach 1.7 million mt and 1.07 million mt, respectively, by 2010.

The productivity growth simulations are also shown in Table 18. Improving productivity ofrice and maize by 50% from the base simulation will result in a lower projected imports of rice (0.804 million mt) and maize (0.372 million mt) by 20 l 0.

On the other hand, a decline of 50% in productivity from the base will result in higher projected imports of 2.6 million mt (rice) and 1.74 million mt (maize) for the Philippines by 2010 (Table 18).

2 The latest 2020 simulation projections ofRosegrant et al ( 1995) for the Philippines using the 1993 data base period indicated the following results: wheat imports, 4.1 million mt; maize, 0.53 million mt; rice, 0.22 million mt and total cereals, 5.2 million mt.

23

Table 17 . Rice and corn area, yield, production, consumption and net I imports, Philippines, 1993-2010.

Year Area Yield Production Consumption

('00 ha) (mt/ha) ('000 mt) ('000 mt)

Paddy Rice

1993 3,283 2.88 6,150 6,324

2000 3,314 3.15 6,810 7,504

2005 3,358 3.36 7,345 8,484

2010 3,412 3.57 7,933 9,595

Com

1993 3,149 1.52 4,795 4,795

2000 3,306 1.79 5,932 6,229

2005 3,434 2.02 6,934 7,543

2010 3,561 2.27 8,074 9,145

Source: David and Balisacan (1995)

24

Net Imports

('000 mt)

153

693

1,140

1,662

0

297

610

1,071

Table 18. Productivity growth simulations, Philippines

Year Area (000 ha)

A. High productivity growth

Yield (mt!ha)

Production (000 mt)

Consumption (000 mt)

Net imports (000 mt)

-----------Paddy------------ ------------------------Rice------------------------

1993 3,283 2.88

2000 3,318 3.29

2005 3,371 3 .59

2010 3,435 393

6,150

7,101

7,888

8,791

-------------Corn-----------

1993 3,149 1.52 4,795

2000 3,317 1.86 6,166

2005 3,453 2.14 7,386

2010 3,586 2.46 8,819

6,324

7,504

8,484

9,595

4,795

6,256

7,576

9,191

153

403

596

804

0

90

191

372

B. low productivity growth

-----------Paddy------------ ------------------------Rice------------------------

1993 3,283 2.88 6,150

2000

2005

2010

1993

2000

2005

2010

3,307

3,343

3,386

3,149

3,296

3,417

3,538

Source: David and Balisacan ( 1995)

3.00

3.08

3.17

6,457

6,718

6,991

-------------Corn-----------

1.52 4,795

l.73 5,705

1.90 6,485

2.08 7,365

25

6,324 153

7,504 1,047

8,484 1,767

9,595 2,604

4,795 0

6,203 498

7,509 1,024

9,105 l,740

3.0 PHILIPPINE RICE TRENDS

3.1 Area, Yield and Production

Trends in the area harvested, yields, and production of rice are shown in Table

19. The total area harvested of rice rose from 3 .3 million hectares in 1990 to 4 .0 million hectares in 2000, an average annual growth rate of 2.7%. This growth is accounted for by the increase in irrigated harvested a~ea that grew by an average of 3.57% per year. This expansion in irrigated rice hectarage was most notable in 1994 to 1995, the second year of the implementation of the Grains Production Enhancement Program (GPEP) and continued until 2000. Irrigated harvested area was 67% of the total palay harvested area at the end of 2000.

Palay production reached 12.39 million mt in 2000, an increase of 45% over the El N ifio stncken crop year of 1997 -1998. Total rice production increased at an annual rate of 3.9% from 1990 to 2000 with irrigated areas contributing 76% of the output.

The national average yield for palay (3.07 mt/ha) is relatively low by Asian

standards. Yields of irrigated nee lands are slightly above 3 .0 mt/ha. Rain fed rice areas

have lower per hectare yields of slightly over 2.0 mt/ha (Table 19).

David and Balisacan (1995) analyzed the sources of growth in domestic rice production from a longer time perspective (1960 to 1994 ). In their analysis, they have disaggregated the nature of rice production growth into three distinct phases: before 1965, 1965 to 1980, and 1980 to 1994. During the pre 1965 period, the major source of growth in production was area expansion across production environment. Yield increases as source of production growth were not a dominant factor during this period. In the irrigated areas, 98% of production growth could be Jccounted for by expansion in area.

From 1965 to 1980, the average growth rate of total palay production reached 4.6%. This penod was the peak of the Green Revolution in rice not only in the Philippines but also in surrounding Asian countries. The adoption of high yielding varieties, expansion of mi gated areas. and utilization of fertilizer resulted in high production growth rates

26

Table 19. Palay: Production, area harvested and yield per hectare, by croptype, Philippines, 1990-2000.

Average ITEM 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Growth

Rate(%)

Philippines

PRODUCTION ('000 mt) 9.J 19 9.673 9.129 9.434 10.538 10,541 11.284 11,269 8.555 11.787 12.389 3.90

Irrigated 6.(105 6.832 6.612 6.730 7,511 7.599 X.234 8.476 6.681 8.918 9.413 4.39

Rainfcd 2.714 2.842 2,517 2,705 3.027 2.942 J.050 2.793 l.874 2.869 2.976 2.90

AREA HARVESTED ('000 ha) 3,319 3,425 3,198 3,282 3,652 3,758 3.952 3,842 3.170 4,000 4,038 2.54

Irrigated 2,010 2.060 1,980 2,017 2,21') 2,334 2.485 2.497 2.182 2.665 2.703 3.36

Rainfed 1.309 1.365 1,218 1,265 1,432 1,424 1.467 1,345 988 1.335 1,335 1.33

YIELD (mt/ha) 2.81 2.82 2.85 2.87 2.89 2.80 2.86 2.93 2.70 2.95 3.07 0.98

Irrigated 3.29 3.32 3.34 3.34 3.38 3.26 3.31 3.37 3.06 3.35 3.48 0.67

Rainfed 2.07 2.08 2.07 2.14 2.l I 2.07 2.16 2.14 192 2.15 2.23 0.89

Source: Bureau of Agricultural Statistics. 200 I

Table 20. Growth rates of palay production, area and yield by production ,

environment, Philippines, 1960-2000.

Item 1960-1965

(%)

Total Production 2.1 Area 16

(76) Yield 0.5

(24)

Irrigated Areas Production 5.4 Area 5.3

(98) Yield 0.1

(2)

Rainfed Areas Production 0.8 Area LO

(125) Yield -0.2

(-25)

Upland Areas Production -1.0 Area -1.6

(160) Yield 0.6

(-60)

1 Data for ramfed and upland areas have been combined since 1980

Source: David and Balisacan, (1995) BAS, (2001)

1965-1980 1980-1994

(%) (%)

4.6 1.9 1.2 -0.1

(26) (-5) 3.4 2.0 (74) (105)

6.5 3.4 2.6 2.1 (40) (62) 3.9 1.3 (60) (38)

3.7 -0.8 12 -2.6

(32) (-125) 2.5 1.8 (68) (225)

0.4 -1.7

(-425) lJ

(325)

28

1995-2000

(%)

4.3 2.5 (68) 1.2

(32)

5.1 3.9 (85) 0.66 (14)

2.7 0.45 (28) 1.2

(72)

typified by a 6.5% production growth rate in the irrigated rice lands. Across the rice production environments, yield growth accounted for more than 60% of production increases.

After 1980, the growth rate of production declined as crop area expansion halted and yield growth declined to 2.0% (David and Balisacan, 1995). Growth in rice production during this period became completely dependent upon increases in yields (Table 20).

· The pattern after 1994 had changed. Increases in aggregate rice production from 1995 to 2000 came from irrigated areas accounting for 68%, while yield contributed only 32%. Irrigated areas also grew on the average by 3.9% during the period while rainfed areas were stagnant.

3.2 Production Performance

The trend in rice production relative to domestic consumption is shown in Figure 3. The graph shows that from 1970 to 2000, there were more years when domestic consumption exceeded domestic production. The years where wide gaps between domestic consumption and production included the 1970s and 1980s.

3.3 Trade Performance

Trends in the import-export of rice are shown in Figure 4. During the period 1980 to 2000, the Philippines had exported rice in modest amounts. Most of these exports were repayments of the government's concessional rice imports from neighboring Asian countries.

Overall, however, the Philippines was a net importer of rice during the period. The most notable import volume of 2.2 million mt was registered in 1998, when the country was hedging over the effects of the El Nifio and La Nifia phenomena.

3.4 Carrying Capacity: Rice Production

Over the years scientists have attempted to develop models examining the complex relationships between population and the environment. The basic perspective was probably developed by Human Ecology, with the assumption that people constantly interact with and adapt to their environments. This two-way adaptation is mediated by some form of organizations and technology. In human ecology, this paradigm is known as population, organization, environment and technology or POET (Ness, 1994 ).

29

8.5

8.0

7.5

7.0

~ 6.5 -E = ~ 6.0 ·5 £ 5.5

w = 0 '11 ::::J

O' 5.0

4.5 --+--Production 1-------------Total Use

4.0

3.5

3.0

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 2000

Year

Figure 3 Philippine rice production and utilization, 1970-2000.

'\00

n n ....... n -

I I I I 0

-500

--E 0 0 ~ ~

.£ -1000

= ~ w = O'

-1 sou DExports

•Imports

-2000

-2500

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 2000

Year

Figure 4 Philippine Rice Exports and Imports, 1980-2000.

3.4.1 Definition

The concept of carrying capacity relates to questions of population pressures on the environment and is defined differently by people of different disciplines.

For a biologist, carrying capacity is the largest number of any given species that a habitat can support indefinitely. Whenthat maximum population level is surpassed, the resource base begins to decline-and sometime thereafter, so does the population (Postel, 1994).

An economist's perspective, Srinivasan ( 1988) viewed carrying capacity as the maximum popu.lation that can be sustained indefinitely in the future. But from the point of view of environmentalists Nebel and :Wright (1998), the concept of carrying capacity refers to the number of species that can be supported indefinitely without degrading the environment. They added that for human societies, it means the ability to meet food needs over the long term - that is sustainably.

On the other hand, Brown and Kane (1994) cited that the earth's carrying capacity is shown by its capability to provide and sustain the basic needs of the present and future generation. They added that we are all depending on a finite environment where resources are easily depleted with unabated use, hence the challenge lies on meeting present and future needs through sustainable resource utilization.

Biologist Garret Hardin, as cited by Nebel and Wright (1998) expressed that if ecology had a decalogue, the first commandment would be "Thou shall not transgress the carrying capacity."

3.4.2 C-C Models

There are at least six international models on carrying capacity which are operational to date (Gonzales, 1990) but in the Philippines two studies attempted to apply the concept of carrying capacity models. One study was called "Population Resources Environment and the Philippines Futures" (PREPF) project, implemented jointly by the Development Academy of the Philippines (DAP), University of the Philippines School of Economics (UPSE), and the UP Population Institute (UPPI). The other Philippine C­C model was done in 1988 in the province of Palawan by the group of Dr. Candido Cabrido of the Population/Development Planning and Research Project of the National Economic Development Authority (NEDA).

32

3.4.3 Extending C-C methodology: The role of technology

The methodology developed by Cabrido was extended to estimate human population capacity in tenns of subsistence levels for rice nationwide. The data used in the estimation came from the 1998-1999 Fanning Systems Surveys of SIKAP /STRIVE Foundation.

The respondents in these surveys were classified into different levels of technology using per hectare yield as indicators: low technology means yields of less than 3 mt/ha; medium technology, yields with 5.0 mt/ha and above.

The fann budgets were also generated by technology and net farm incomes by technology, were calculated using the standard costs and returns methodology. Average landholdings and cropping intensity were also based on the surveys while the subsistence level expenditures (poverty threshold) by region came from the National Economic Development Authority.

Extending the fonnula of Cabrido ( 1988), the index of C-C at subsistence level for a crop was estimated as:

NH x L x CI ii

C-C = -----------

SE+ (0.15 x SE)

\Vhere: C-C NFI L CI SE

i,t

=carrying capacity at subsistence level = net fann income =average landholdings =cropping intensity =subsistence level expenditures or poverty threshold

by region plus 15% savings =province and technology

Intuitively, if the C-C ratio is greater than one, it implies that the subsistence level was met. Failure to meet subsistence level will result to impoverishment, compelling the population to exhaust the productivity of the ecosystem.

Six rice producing provinces (Ilocos Norte, Pangasinan, Isabela, Nueva Ecija, Iloilo, and North Cotabato) were subjected to the C-C analysis here. The rice production systems during the main crop year 1998-1999, were classified into water regimes (irrigated, rainfed) crop establishments (transplanted and direct seeded) and levels of technology

33

(low, medium and high). The survey also provided the data on average landholdings per household and cropping intensity. Finally, the regional poverty threshold level, i.e., the mimmum household income to satisfy nutritional requirement of 2,000 calories per capita for a household size of five, came from NEDA.

Preliminary results from the estimates3 showed that in Ilocos Norte (Table 21 ), only those households with high yields from irrigated and transplanted rice had mcome that can sustain their minimum household subsistence requirements. This can be attested by the ratio of 1.24.

This same pattern was demonstrated in Pangasinan, except that direct seeded irrigated and transplanted technology rice was also economically sustainable with ratio of annual net farm income to poverty threshold of 1.28 (Table 22).

In Isabela, the irrigated, transplanted rice production systems from medium to high yields, had ratios of 1.5 and 2.26, respectively (Table 23). Incomes from non­irrigated transplanted rice were not sufficient to sustain expenditures higher than the household poverty threshold of P49,365 per annum.

Nueva Ecija (Table 24) on the other hand, had high yield irrigated rice technology incomes that can cover subsistence level expenditures; Iloilo incomes from medium and high technology direct seeded irrigated and transplanted rainfed rice production had ratio greater than one (Table 25); North Cotabato, only high yield irrigated transplanted had ratio greater than one (Table 26); while South Cotabato's net farm incomes from medium technology irrigated and non-irrigated rice production, and high technology imgated production system were higher than subsistence level expenditures (Table 27).

In summary, from the rice data analyzed, it appears that only adoptors of the rice high technology yield in favorable areas (irrigated) had higher chance to generate net farm incomes to cover poverty threshold expenditures.

'A more mtensive treatment on the subject being currently undertaken by STRIVE Foundation and PhilRice to include actual nutritional intakes and alternative sources of incomes among rice produc­ing households. See Strive Foundation and Phi!Rice (2002).

34

Table 21. Rice carrying capacity in terms of subsistence level, Ilocos Norte, 1998.

Net farm Average Cropping

income .

landholding' intensity a

TECHNOLOGY (P1hwseason) (ha)

IRRIGATED

Transplanted

Low Yield' 2,666 I.SO 2.00

Medium Yield' 6,827 I.SO 2.00

High Yieldr 21,557 1.50 2.00

All Yield Levels 10,350 1.50 2.00

NON-IRRIGATED

Transplanted

Low Yieldd 112 l.50 1.00

l\kdium Yi<ld' 12,880 1.50 1.(J(J

High Yieldr 24,194 UIJ 1.00

All Yield Levels 12,395 1.5() 1.00

II Source. Sl[\ _ _,ajl,'STRIVE Rice.Based Fnnnmg sy~tems Sur\ey. Decemher 199~ to !vL:m:h 1999

b annual pe:r cap1h1 thresltold x family household .size of 5, Source Stat15-.tical Y rnrhook, l 99S

Regional

poverty

threshold'

(Annnal)

59,905

59,905

59,905

59,905

59 ,905

59,91J5

59.905

59.905

c (net farm mcome :<..average landholdmg x cropping mtens1ty)/(reg10nal po'>·erty threshold + 15% .:-:avi11g8)

'with paltty yield oflm than 3 0 mL11wseason

•with palay yield oflO hut Jen thfill 5 0 nn.'ho/se::fron 1 with palay yield of greater than 5 0 mt/ha/::.:ea~on

SOURCE· STRlVE Foundation, 1999

35

Carrying

capacity

in terms of

subsistence

level'

0.15

0.39

1.24

0.60

OJJll

IJ.37

0.71!

0.36

Table 22. Rice carrying capacity in terms of subsistence level, Pangasinan, 1998.

Net farm Avera gr Cropping Regional

income a la mlholdiug . intensity' poverty

TECIDOLOGY (P.iha/season) (ha) threshold•

(Annual)

IRRIGATED

Transplanted

Low Yield' 4,999 1.84 2.00 59,905

Medium Yieldd 11,457 1.84 2.00 59,905

High Yield'. 17,426 1.84 2.00 59,905

All Yield Levels 11.294 1.84 2.00 59,905

Direct

Low Yield'

Medium Yield' 18,1:17 1.84 2.00 59,905

High Yield'

All Yield Levels

NOJ\-IRRIGATED

Transplanted

LowYidd'. 304 1.84 1.00 59,905 Medium Yield' 12,241 1.84 LOO 59,905 High Yield'

All Yield Levels 6,273 1.84 LOO 59,905 Direct

Low Yield'

Medium Yield'

High Yield'

All Yield Levels

'Source: SIKAP/STRIVE Rice-Baoed Fanning Systems Survey, December 1998 to March 1999

b annual per capita thre,hold x family hou,ehold '1ze of5; Source: Statistical Yearbook, 1998

Carrying

capacity

in terms of

subsistence

level'

0.35

0.81

1.23

0.80

1.28

0.01

0.43

0.22

' (net fann income x a..-ernge landholdmg x cropping mtensity)/(regional poverty threshold+ 15% savings)

d with palay yield of le" than JO mt/haisearnn

'with palay yield of3.0 hut bs than 5.0 mt/halsea,on

r with pa lay yield of greater than 5.0 mt/ha/season

SO\."RCE STRJ\'L Foundation, 1999

36

Table 23. Rice carrying capacity in terms of subsistence level, lsabela, 1998.

Net farm Average Cropping Regional

income' landholding' intensity' poverty

TECHNOLOGY (Plbalseason) (ha) threshold b

(Annual)

IRRIGATED

Transplanted

Low Yield' 2,164 2.50 2.00 49,365

Medium Yieldd 13,208 2.50 2.00 49,365

High Yield' 19,406 2.50 2.00 49,365

All Yield Levels l 1,593 2.50 2.00 49,365

Direct

Low Yield'

Y!edium Yieldd

High Yield'

All Yield Levels

'.'10~-IRRIGATED

Transplanted

Low Yield' 2,909 2.50 1.00 49,365

Medium Yieldd 11.075 2.50 1.00 49,365

High Yield' 17,019 2.50 1.00 49,365

All Yield Levels 10,334 2.50 LOO 49,365

Direct

Low Yield'

Medium Yieldd

High Yield'

All Yield Leve ls

'Source: SIKAP/STRIVE Ri.:e-Based Farming Systems survey, December 1998 to March 1999

b annual per capita threshold x family household size ol 5~ So11n:e: Statistical Yearbook. 1998

Carrying

capacity

in terms of subsistence

level'

0.25

1.54

2.26

135

0.17

0.65

0.99

0.60

'(net form income x average landholding x cropping intensity)!( regional pol'erty thre>hold ~ 15% >al'ing~) 1 with palay yield of !es> than 3.0 mtihalseason

'with palay J ield of 3.0 but less than 5.0 rnt'hwseason

r with palay yield of greater than 5.0 rntha'>eason

SOCRCE STRJVE Foundat1011, 1999

37

Table 24. Rice carrying capacity in terms of subsistence level, Nueva Ecija, 1998.

~et farm Average Cropping Regional

income' landholding' intensity' poverty

TECHNOLOGY (P/ha!season) (ha) threshold b

(Annual)

IRRIGATED

Transplanted

Low Yield' (3,720) 2.50 2.00 64,185

Medium Yieldd 2,457 2.50 2.00 64,185

High Yield' 24,531 2.50 2.00 64,185

All Yield Levels 7,756 2.50 2.00 64,185

Direct

Low Yield' (2,101) 2.50 2.00 64, 185

Medium Y1eldd 5,132 2.50 2.00 64,185

High Yield'

All Yield Leveb 1,516 2.50 2.00 64,185

l\O'l'-IRRIGATED

Transplanted

Low Yield' 240 2.50 1.00 64.185

.'v!edium Yield; 8,787 2.50 1.00 64,185

High Yield'

All Yield Levels 4,514 2.50 1.00 64,185

Direct

Low Yield' 283 2.50 1.00 64,185

Medium Yieldd

High Yield'

All Yield Levels

'Source SIKAP/STRIVE Rice-Based Farming Systems Survey, December 1998 to March 1999

b annual per capita threshold x family household size of 5; Source: Statistical Yearbook, 1998

Carrying

capacity

in terms of subsistence

level'

(0.33)

0.22

2.20

0.69

(0.19)

046

0.14

0.01

039

0.20

0.01

' (net farm income x average landholding x cropping intensity)/(regional poverty threshold+ 15% savings)

d with palay yield of less than 3.0 mtlha/season

'with palay yield of10 but less than 5.0 mtihaiseason

r with palay yield of greater than 5.0 mt/ha/season

SO\.RCE: STRIVE Foundation, 1999

38

Table 25. Rice carrying capacity in terms of subsistence level, Iloilo, 1998.

Net farm Average Cropping

income• landholding' intensity'

TECHNOLOGY (Plha/season) (ha)

IRRIGATED

Transplanted

Low Yield' (321) lOO 2.00

Medium Yield' 7,555 lOO 2 00

High Yield'

All Yield Levels ~.617 3 00 2 00

Direct

Low Yield' 2,213 3 00 2 [l(J

Medium Yield' 10,281 3 00 2 00

High Yield' i8,246 l.00 2.011

Ali Yield Leveb 10,247 3.fJ(J 2.00

NON-IRRIGATED

Transplanted

Low Yield'

Medium Yield d 7,131 3.00 1.50

High Yield' 14,381 lOO 1.50

Ail Yield Levels 10,756 3.00 1 50

Direct

Low Yield' 1,814 3.00 1.50

Medium Yield'

High Yield'

Ail Yield Levels

•Source SIKAPiSTRJVE Rice-Based Fanning Systems Survey, December 1998 to March 1999

' ammal per capita tl~"hold x family household size of5; Source: Statistical YeartJook, 1998

c (net fann mc1.1me x average landh~)tdmg x crnpping intensity)/(regional poverty threshold+ 15% savings) 11 1.v1th palay yteld l,f l..:~s than JOmt!halscason

' \\1th palay yield L'f 3 0 but le5s than 5 0 mt!ha1sea.~c1n

r with pi!.lay yield Llf gre<iter than 5 (1 mt11ahea~on

SOURCE STRJVE Foundation, 1999

39

Regional

poverty

threshold b

(Annual)

52,790

52,790

52,790

52,790

52,79rJ

52.79!.l

52,7911

52,7%

52,790

52,7%

52,790

Carrying

capacity

in tenns of subsistence

level'

(0.04)

0 99

047

(I 29

I 14

218

1 14

() 711

1 41

I 05

0.18

Table 26. Rice carrying capacity in terms of subsistence level, North Cotabato, 1998.

Net farm Average Cropping

income a landholding ' intensity'

TECHNOLOGY (P/ha!season) (ha)

IRRIGATED

Transplanted

Low Yield' 2,273 1.50 2.00 Medium Yieldd 8,697 150 2.00

High Yield' 16,495 l.50 2.00

All Yield Levels 9,155 1.50 2.00

Direct

Low Yield' 53 1.50 2.00 Medium Yieldd 12,716 1.50 2.00 High Yield' 15,119 l.50 2.00

All Yield Levels 9,296 uo 2.00

NON-IRRIGATED

Transplanted

Low Yield' (2,343) 1.50 LOO Medium Yieldd

High Yield'

All Yield Levels

Direct

Low Yield'

Medium Yieldd

High Yield' 20,584 uo LOO All Yield Levels

• Source: SIKAP1STRJ\'E Rice-Based Farming Systems Survey. Decernbei 1998 to March 1999

•annual pet capita tlrreshold x family household size of .1. Source: Statistical Yearbool, 1998

r (net farm income \average landholding x cropping Lntensi~, \.(regional povert) threshold + 15% sa\ ing~

d with palay yield of less than 3 .0 mt'lia•season

'with palay yield of 3.0 but ltss than ~.O 1m'lLa. stason

r with palay yield of greacer than ~.O mt1ha/season

~Ol1RCE STRIVE Found"t1rn1. l 999

40

Regional Carrying

poverty capacity

threshold b in terms of (Annual) subsistence

level'

55.775 0.14

55,775 0.54

55,775 1.02

55,775 0.57

55,775 0.00

55,775 0.79

55,775 0.94

55,775 0.58

55.775 (0 07)

55.775 0.64

Table 27. Rice carrying capacity in terms of subsistence level, South Cotabato, 1998.

Net farm Average Cropping

income" landholding" intensity"

TECHNOLOGY (P/ha/season) (ha)

IRRIGATED

Transplanted

Low Yield' 222 2.50 2.00

Medium Yieldd 11,076 2.50 2.00

High Yield' 21,129 2.50 2.00

All YielJ Levels 10,809 2.50 2.00

Direct

Low Yield' 1,011 2.50 2.00

Medium Yieldd 8,619 2.50 2.00

High Yield' 19,487 2.50 2.00

All Yield Levels 9,706 2.50 2.00

NO:>l-IRRIGATED

Transplanted

LowYiekl"

Medium Yield' 18,075 2.50 I.SO

High Yield'

All Yield Levels 18,075 2.50 1.50

Direct

Low Yield' 2,887 2.50 1.50

Medium Yield'

High Yield' 24,005 2.50 1.50

All Yield Levels 13,446 2.50 1.50

~ Sl'urce· SiKAP'STRJVE Rice·Ba5ed Fmnmg :-iy~tem~ ~t1m~y. Decembe;-19% t·J \f;tT'l;h 1999

b annual per capita tlm;$ltl1ld x fannly lwusdwld size iJf5, Sl)l\r(e Stati.:.:1cal Yt:arl.ll'11k, 199~

~(net fann mcl1me x averagt! !andlK•ldmg x CI\'·HJ!.llg.111\en$it;()\regwu:1\ pc1vel"I! tliresh,1lc\ -t 1s~ 6 ~a\ uig.;-1

d wtth pa.lay yield CJf less tLa.11 3.0 mt/hai~ea~L'll

' with palay yield d ~ 0 but :~s than 5 '.! mti\tVie:1<.1)1\

1 with paL~y yield L'f to!reatl1' than 5 1'· mt la S1;!<1Sl)lJ

SOURCE STRIVE FoC111dat1on, 1999

41

Regional

poverty

threshold b

(Annual)

52,445

52,445

52,445

52.445

5 2 ,445

52,445

5 2,445

52,445

52,445

52,445

52,445

52.445

52,445

Carrying

capacity

in terms of

subsistence

level'

0.02

l.21

2.32

l.19

O. l l

0.94

2.14

l.06

149

1.49

0.24

197

111

4.0 IMPACTOFGLOBALIZATION ON THE RICE SECTOR

Rice is the only commodity in the Philippines that is allowed quantitative restrictions (QRs), under the GATT-WTO. This exemption holds up to 2004. At the tariff rate of 50 percent, the minimum access volume is 119,500 mt for 2000, increasing to 224,000 mt by 2004. Given the economic environment after the GATT-WTO accession, the impacts of "three external shocks" in the rice sector are examined in this section. These external shocks include Philippine rice global competitiveness before and after GATT-WTO; the effects of trade liberalization after 2004; and the impact of the Asian financial crisis on the net profitability and competitiveness of the rice industry.

4.1 Competitiveness of the Rice Industry Before and After GATT-WT04

To appreciate the analysis of the impact of trade liberalization in the rice sector, assessment of the state of profitability and global competitiveness of the rice sector before and after the signing of GATT-WTO is put forth in this chapter. The analysis compared the national profitability and competitiveness of the rice sector using data during the crop years 1994-1995 (Pre GATT period) and 1996-1997 (Post GAIT period). The analysis also delineated the rice pruduction systems (particularly the irrigated ecosystems) by season (wet and dry) and by levels of technology (low, medium and high).

4.1.1 Profitability Analysis

Three variables are crucial in the analysis of net profitability. These are the yield levels, the prices of inputs and outputs, and the management pattern of input (cost) utilization. A minor problem in the cost comparison across time periods was the use of current prices dunng the given period. To normalize values and be comparable across time, the costs and returns per hectare were deflated by actual yields.

4Taken from Gonzales et al (2000)

42

Tables 28 and 29 summarized the net profitability comparison of Philippine rice farms during the Pre GATT-WTO ( 1994-1995) and Post GATT-WTO ( 1996-1997) periods, by season (wet and dry) and by levels of technology (low, medium and high). During the wet season, cost of production per hectare generally was negatively correlated with higher yields, i.e., cost per unit declined as yield increases. This was a general trend for both periods (Pre and Post GATT-WTO) during the wet season. On the average (across technologies), however, cost per metric ton on farm (P3,732/mt) was lower during the Pre GATT-WTO period as compared to the Post GATT-WTO period (P4,S42/mt). This trend also held true at the wholesale level. Net income per metric ton for the two periods during the wet season, was almost identical at the farm gate, but higher net income per metric ton at wholesale for the Post GATT-WTO period. The major explanation for this was the increase in wholesale market price of rice by 42 percent i.e., from Pl2.03/kg. (Pre GATT-WTO) to P17.00/kg. (Post GATT-WTO). At the farm level, on the other hand, the farm gate price only increased 14 percent from the Pre GATT-WTOperiod (P6.80/kg.) to the Post GATT-WTOperiod (P7.75/kg).

Clearly during the wet season, differences in net profitability at both farm and wholesale among Philippine farms before and after GATT-WTO were determined, to a major extent, not by technology levels but by output price increases and to some extent patterns of input use (Table 28).

During the dry season, the costs of production per unit at both farm and wholesale were still lower during the Pre GATT-WTO period than after the GATT-WTO period (Table 29). Also, net farm income per metric ton during the Pre GATT-WTO period was slightly higher (P3,980/mt) on the average than after GATT-WTO period (P3,l l l/ mt). However, due again to an increase in wholesale price of 23 percent from the Pre GATT-WTO to the Post GATT-WTO period, net wholesale income was higher by 28 percent during the Post GATT-WTO period (P7 ,517 /mt) than the Pre GATT-WTO period (PS,847/mt).

Rice net profitability for both the wet and dry seasons, before and after GATT were determined by both output and input price changes during the periods. However, since technology adoption levels appeared to be stable in the irrigated areas, the dominant effects of rice price increases during the Post GATT-WTO period generally outweighed the input price increase effects to make net profitability at the wholesale level higher during the Post GATT-WTO period than the preceding period.

43

Table 28. Farm to wbolesalt costs and returns of irrigated rice production by teehnology before GATT-WTO (1994-1995)

and after GATT-WTO (1996-1997), "''' se0>on, Philippines.

BEFORE GATI-WI'O 11994-199!

m:M Low Medlu.m )leld' yteld\

Yield(mllha)

Palay 2.029 3.79l

Rice• 1.319 2.467

Priceofoulput

F_ .. (P/kg) 6.80 6.80

Wholosak(PAq) 1203 1203

Cl'ossretu'n

F_ .. (PAla) 13,797 21,806

Wholonle(PAla) lS,866 29,675

ProducUoa Costs {Pflu)

C11'"1ftentr

Seeds 1,059 1)12

Fntilizcr 253 3n

Chmtic1l1' 76l 1,069

hrigationfee 780 893

T11nspa1atilll 410 690

F"'hndOil 725 772

UIHrurlJ

Landprep••tioo 882 1,336

Prtrharvatf 2,716 3,173

PoR-hll'vClt 1 2,960 4,877 ,,,,,,,.ti,,, 514 160

lAlli(rnMINI"") 626 626 tJtlr,,,..,,.:ia 643 817

T°"IProdlldlenCotUtpAla) 12,413 16,40-0

Pm ...... Cods'iPAla) 868 1,623

Marketq Cods !PAia) 1,870 l,498

TotalCodstpAla) ll,lll 21,121

Net Farm Income (P1111) 1,385 9,406

Net Wholesale Income (Plha) 71l 8,ll4

Total Coll/Yield IP/mt)

F11TI11"' 6,118 4,322

Wholesale 11,488 8,724

Net Income/Yield (Plmt)

Fumgatc 682 2,478

Wholesale 542 3,306

' wrth pa lay yield of less than 3. 0 mtilla/season ' with palay yield of 3.0 but less than 5.0 mtlha/season 'with palay yield of greater than 5.0 mt!ha/seasott • the nulling rate of rice is 0 65 • includes herbicides, weedicides, pesticides, insecticides,

fungicides, mollucictdes and rodenticides

Hl&h )'leld'

1.947

3.866

6.80

1203

40,440

4~503

1,358

l(I).

941

681

474

m

1,673

2,613

4,l93

lT7

626

1,004

ll,117

2,l44

l,481

23,142

ll,322

23,360

2,142

5,987

4)18

6,043

'includes transplanting/direct seeding, weeding. fertilizer apphcation, chemical application and irrigation

SOURCE: SDI\IB FOllldatim, 1999

All

)feldleveb:

3.924

2ll0

6.80

1203

26,681

30,681

1)10

277

92l

786

538

689

1J97

2.834

4,07i

564

626

821

14,643

l,678

3,616

19,938

12,038

10,743

3,732

7,818

3,068

4)12

44

AF'IER GATI-WI'O 11996-19911

Low Me11um Hl&k

>!old' )hid\ >!old'

2.214 3.832 5.660

1.439 2491 3.679

7.75 7.71 7.75

17.00 17.00 17.00

17,165 29,706 43,869

24,410 42,349 62.S40

1,143 1,384 1.n9

1.679 2,342 3,346

1,050 1,375 1,843

791 uos 1,083

69 95 100

313 146 611

l,006 1,523 1,907

l,Sl9 3,382 4,896

1,599 3,730 l,9l8

632 638 618

713 713 713 733 931 1,145

11,288 17,866 24,023

1,080 1,868 2,719

2,143 3,709 l,478

14,lll 23,444 32,260

,,877 11,840 19,846

9,959 18,90l 30,280

l,097 4,662 4)4!

10,081 9,411 8,769

2,6S4 3,089 3,S07

6,919 7,189 8)31

'includes harvesting, threshing. drying and hauling

11 mcludes food costs, interest expenses and landtax

1 milling costs

All

yteldl!vth

3.902

2.536

7.71

17.00

30,246

43,119

1,429

2.4~6

1,422

1,028

88

50l

1,479

3,265

3,762

643

713

936

17,lll

1,902

3,777

23,40,

12,l21

19,711

4,5"2

9)27

3)09

7,773

Table 29. Farm to wholesale costs and returns of irrigared rice production by technology before GA TT-WTO (1994-1995) and after GATT-WTO ( 1996-1997), dry season, Philippine~

BEFORE GATT-WTO /1994-19'5 l\FTE:R GATT·WTO '1996-19971 ITEM Low Medium Hig• All Low Medium Hilh All

yield' yield• yield' yield levels yield" yield~ yield' yield levels

Yicld(IBL't!•ll

Palay 2.012 1830 5880 1907 2 130 1901 5.809 )947 Ricc'1

1.308 2.490 J822 2.l40 1.384 2.ll6 1776 2 565 Priccofou1pu1

F:umg;uc(Pllg) 780 7.80 7.80 7.80 7.82 7.82 7.82 7.82 Whokuk (P/kgJ 1380 IJ 80 1180 13.80 17.00 17.00 17.00 17.ClO

Grossrctum

f«111ga1c (Pih.ii) 15,694 29,874 45.864 30,477 16.655 30,508 45.426 30,863

Wholeuk(P.11aJ 18.048 34.355 52.744 35,049 23.534 43.109 64.189 43,610

Prodadkt1 Costs(P/hil1

CIUmlltlSIS

Seed$ 863 I.Ill 1.m 1,094 1,199 1,442 1,677 1,439

Fertilizer 426 255 476 386 1.865 2.513 J91J 2.764

Chcsuicals" 688 1.035 1.093 939 914 1,484 1.520 1.306

lrrigillion rec 688 1.005 1.062 918 874 1.207 1.296 1.125 Trilnsponatiou JJJ 642 622 532 72 105 113 97 Fuel and Oil 613 827 680 707 SJJ 509 lll 531

Lahorct1~~

Land prcparauo11 1.000 1.167 1.725 1,297 1.140 1.330 l.966 l.479 Prc·llilrvCSI I 2.219 3.198 J.550 2.989 2,60! 3.285 4.352 3.413 Posl·hilrvcst ~ 2.239 4.352 5.629 4.073 2.087 4.257 6.432 4,258

Dtputiatlon 589 564 566 573 672 643 645 6Sl L1114(m1talvolue) 718 718 718 718 719 719 719 719 OlltercosJ.f 1

' 6Jl 71) 755 700 722 Bil 861 199 Total Prodution fosts(P1l1~1 11.009 15.610 !8,161 14,927 IJ.397 18.306 l4.047 18.584

Proce11hl1Cotts'(P'11i1) 861 l.638 2.515 1.671 1.038 1.902 l.832 1.924 M1rketi11Co111 !P/hil) l.8l4 J,lJO 5.420 J.601 2.061 J.176 5.622 J.820

Tocal(olb(P/ha) 13.724 20.778 26.096 20.199 16.497 23.984 J2.l02 24.327

Ntt Ftrm hu:omt(Pl11•) 4.685 14.264 27,703 l5.S50 3,257 12.202 21.378 12.279

Net Wlloln1lt l1come(P/hi1\ 4,324 13,577 26.648 14.850 7,037 l9,12S 31.687 19.283

Tetal COlll'YWld (P/1nt)

FiU111gille 5.472 4,076 J,089 J.820 6.290 4.692 4.140 4.709 WbolCSitlt 10.4CU 8,346 6.828 7,953 ll.917 9,458 8.608 9,483

Netl.come/YleJd(Plml)

Fimngatc l.J28 J,724 4,711 l.980 l.llO l.128 ).680 l.111 Wboleult J.306 5.454 6.972 5,847 5,083 7,542 8,392 7.517

' with palay yield of less than 3.0 mt/ha/season 'includes harvesting, threshing, drying " with palay yield of 3.0 but less than 5.0 mt/ha/season and hauling • with palay yield of greater than 5.0 mt/ha/season "includes food costs, interest expenses " the milling rate of rice is 0.65 and landtax ' includes herbicides, weedicides, pesticides, insecticides, 'milling costs

fungicides, mollucicides and rodenticides ' includes transplantin!Vdirect seeding, weeding, fertilizer application,

chemical application and irri~ation SO(!ll.t I': SlKIVI: ~ullllULtun, l!J'.I"

45

4.1.2 Competitiveness analysis

Analysis of price and cost competitiveness was done before and after the GATI scenario for the rice sector under the import substitution and export trade regimes.

4.1.2.1 Price competitiveness

As discussed in the methodology section of this report, price competitiveness exists if the ratio of import or export parity prices with wholesale domestic prices exceeds unity. Under the import substitution trade regime, the analysis showed that domestic rice prices at the provincial level were competitive with rice import before and after GAIT. However, the level of price competitiveness declined by 10 percent and three percent for wet and dry season, respectively, after the GAIT-WIO period (Table 30).

Under the export trade regime, Philippine domestic rice prices are in general not competitive with price exports at the level of $241-246/mt. Such price non-competitiveness was further eroded after the GATI-WTO period by -15 percent during the wet season and -16 percent during the dry season (Table 31 ).

4.1.2.2 Cost competitiveness

Using the resource cost ratios (RCRs) as indicators of cost competitiveness '

and the criteria: RCR < 1, competitive; RCR = 1, neutral; RCR > 1, uncompetitive, results of the analysis showed that except at low levels of technology, domestic rice production was competitive with imports. The RCRs ranged from 0.48 to 0.81 during wet season and 0.57 to 0.76 during dry season before GATI-WIO, with corresponding RCRs of0.75 to 0.83 (wet) and 0.75 to 0.83 (dry) after GATI-WTO (Table 32).

Across technologies, cost competitiveness of domestic rice production under import substitution declined at the average of 16 percent (wet season) and 18 percent (dry season) after GATT-WTO. The major reason for the decline was the increase in the cost of major inputs (fertilizer, chemical and seeds) after the signing of the GATI­WTO.

Under the export trade regime, domestic rice production was not cost competitive for both Pre and Post GAIT periods as indicated by their RCRs that were greater than one across technology and season. Results also indicated that on the average, non­export cost competitiveness had deteriorated by 25 percent (wet season) and 27 percent (dry season) during the post GATI-WTO period (Table 33).

46

Table 30. Price competitiveness of domestic irrigated rice production as imports by season before (Crop Year 1994-95) and after (Crop Year 1996-97) the GATT-WTO, Philippines.

WET ITEM

Before After

Price FOB (U.S.$ per mt), Thailand port 241 246

Freight and Insurance 54 54

C!F Manila 295 300

Times Foreign Exchange Rate 26.07 26.30

CIF Manila (Plmt) 7,691 7,890

Plus (Tariff rate%) 50 50

Amount 3,845 3,945

+ Handling cost 29 29

+Trading cost 680 680

Distribution Costs (Manila to wholesale province) 1,333 1,651

Domestic Wholesale Import Parity Price (P/mt) 13,578 14,196

Domestic Wholesale Price at Province (P/mt) 10,617 12,397

Import Parity/Domestic Wholesale Price' 1.18 1.15

% Increase(+ )!Decrease(-) -IO

'competitiveness exists if import parity/domestic wholesale price is greater than one SOURCE: STRIVE Foundation, 1999

47

Before

241

54

295

26.07

7,691

50

3,845

29

680

1,333

13,578

11.705

1.16

DRY

After

246

54

300

26.30

7,890

50

3,945

29

68(J

1,651

14,196

12,634

1.11

-3

Table 31. Pric. compditiventss of domestlcirrigated rice production as exports by ltclmology and

by smon before(Crop Year 1994-95) and afttr (Crop Year 1996-97) the GAIT-WTO. Philippints.

ITEM

Pnce FOB (U.S. $per mt), Thailand port

Time.s Foreign Exchange Rate

Export Price

Less

Handluigcost Trading c0st

Expor1 Parity Pnce

Per Urnt Cost at Fann

Plus Distributi<>n co:;t (farm to Mrulila)

c~11.wersi0n factnr (!5% losses)

Pwce~smg cost (nullmg cost)

Domestic Whc>lesale Pnce at Manil•

Export fQrity1Do1tustit WhoJ1Sa11 Pritt "

% Increase(+ )!Decrease(-)

ITEM

Price FOB (U.S. $per mt), Thailand port

Times Foreign Exchange Rate

Export Price

less

Handling cost

Trading cost

Export Parity Pnce

Per Unit Cost at Fann

Plus

Distributirn~ ccGt (farm to Manila)

Convernon factor {35% losRes)

Processmg cost (nulling cost)

Domestic Wholesale Price at Mruiila

Export Parity!Domtstit Wholtsait Pritt '

% Increase(+ )!Decrea1·e(-)

• WJt.h palay )'l.eld ofless tll.an 3.0 mlAlalse~on

~ w1U1 palay yield of 3 0 bUl less than 5.0 mt/ha/season c with palay yield more than 5.0 mt/ha/season

Lowvield'

Before After

241

2607

6,283

29 680

5,574

6,ll8

1,418

2,6)8

658

10,8J2

0.51

246

2630

6,470

29

680

5,761

5,091

1,756

2,.199

750

10,002

0.58

12

Lowvield'

Before After

241 246

26.07 26.JO

6,28l 6,470

29 29

680 680

5,574 5,761

5,472 6,290

1,418 l,756

2,412 2,816

658 750

9,960 I 1,612

0.56 0.50

·ll

1 competit:J.veness exists if eXP<'rt parity/dome.~tic wholesale price is greater than one SOURCE STRIVE Foundati011, 1999

48

WEI SEASON

Medinm •ield'

Before After

241

26.07

6,28J

29

680

5,574

4,122

1,418

2,009

658

8,4071

o.66 I

246

26.lO

6,470

29

680

5,761

4,662

l,756

2,246

750

9,414

0.61

·8

Hi•h vield'

Before After

241

26.07

6,283

29

680

5,574

2,542

1,418

1,386

658

6,004

0.93

246

26.JO

6,470

29

680

5,761

4,245

I,756

2,100

7511

o,851

0.65

.Jo

DRY SEASON

Medinm vield • Hi•h vleld'

Befo'e After Before After

241 246 241 246

26.07 26.30 26 07 26.JO

6,283 6,470 6,283 6,470

29 29 29 29

680 680 680 680

5,574 l,761 5,574 5,761

4,076 4,692 3,089 4,140

1,418 1,756 1,418 1,756

1,923 2,257 1,577 2,064

658 750 658 750

8,075 9,455 6,742 i,710

0.69 0.61 0.83 0.66

-12 ·20

AU vield leveb

Before After

241

26.07

6,283

29

680

5,574

J,732

1,418 I 1.803

658

7,611

0.73

246

26.30

6,470

29

680

5,761

4,542

1,756

2,204

750

9,252

0.62

.JS

AU vleld leveb

Befo" After

241 246

26.07 26.JO

6,283 6,470

29 29

680 680

5,574 5,761

l,820 4,709

1,418 1)56

1,m 2,26.\

658 750

7,719 9,478

0.72 0.61

·16

Table 32. Competitive advantage: resource cost ratios, import substitution trade regime, before GATT-WTO (1994-1995) and after GATT-WTO (1996-1997) of irrigated rice production by technology, by season, Philippines.

Before After

SEASON/TECHNOLOGY GATT-WTO GAIT-WTO

(1994-1995) (1996-1997)

-------Resource Cost Ratios d __________

WET SEASON

Low Technology"

Medium Technology b

High Technology'

All Technologies

DRY SEASON

Low Technology'

Medium Technologyb

High Technology'

All Technologies

'with palay yield ofless than 3.0 mt/ha/season b with palay yield of3.0 but less than 5.0 mt/ha/season

' with palay yield of greater than 5.0 mt/ha/season

1.19 0.91

0.81 0.83

0.48 0.75

0.69 0.80

1.05 118

0.76 0.83

0.57 0.75

0.71 0.84

d RCR less than 1 implies globally competitive; equal to I, neutral; and greater than 1, globally uncompetitive

SOURCE: STRIVE Foundation, 1999

49

Percent Change

(23.20)

2.54

55.99

1581

13.10

9.82

31.56

17.84

Table 33. Competitive advantage: resource cost ratios, export promotion trade regime, before GATT-WT0(1994-1995) and after GATT-WTO (1996-1997) of irrigated rice production by technology, by season, Philippines.

Before After

SEASON/TECHNOLOGY GATT-WTO GATT-WTO Percent Change

(1994-1995) (1996-1997)

-------Resource Cost Ratios d ••••••••••

WET SEASOI\/

Low Technology' 2.30

Medium Technologl 1.53

High Technology' 0.94

All Technologies l.32

DRY SEASON

Low Technology' 2.03

Medium Technology b 1.44

High Technology' 1.11

All Technologies 1.35

" with palay yield of less than 3.0 mtiha;season

1> with palay yield of 3.0 but less than 5.0 mt/ha/season

' with pa lay yield of greater than 5.0 mt/ha/season

1.96

l.69

1.52

l.65

2.57

1.71

1.48

1.72

"RCR less than I implies globally competitive; equal to I, neutral; and greater than I. globally uncompetitive SOURCE: STRIVE Foundation. l 999

50

(14.48)

JO 68

61.47

24.85

16.12

18.56

33.66

17.06

4.1.3 Rice technologies and competitiveness

The role of technology in enhancing global technology is crucial. Technology adoption, as reflected in higher yields, does not only shift the supply curve but lowers per unit cost of production. In the previous analysis, the cost-yield data showed that per umt cost was inversely correlated with higher levels of technology (yields) across sea so:~ There is therefore a need to shift average yield levels among rice farmers in the countr: to enhance global competitiveness.

4.1.3.1 Yield distribution among rice farms

Yield distribution among irrigated farms before and after GATT-WTO. a~ analyzed by two independently conducted surveys are shown in Table 34. Before the GATT-WTO, the BAS Mid-GPEP survey of 4,675 irrigated rice farmers showed that 40-45 percent had yields ofless than 3.0 mt/ha; 49 percent with yields from 3.0 to less than 5.0 mt/ha; and 7 to 11 percent with yield levels of 5.0 mt/ha and above, across season (Table 34).

After the GATT-WTO, the PHILRICE-BAS survey of 1,221 irrigated rice farmers indicated the following percent yield distribution: 33 percent of farmers have yields lower than 3.0 mt/ha; 48-53 percent with yields that ranged from 3.0 to less than 5.0 mt/ha; and 14 to 18 percent of farmers had 5.0 mt and higher per hectare yield (Table 34). For both periods (Pre and Post GATT-WTO) and seasons, the average modal distribution (50 percent) of rice yields in the imgated areas is within the 3 .0 to less than 5.0 mt/ha range (medium technology), followed by 38 percent low technology and 12 percent high technology levels.

In the rainfed areas, after the GAIT period. yield distribution was skewed at the low technology level with an average of71 percent of farmers gettmg yields ofless than 3 .0 mt/ha: 26 percent with yields between 3 .0 to less than 5 .0 mt/ha.: and 3 percent with yields 5.0 mt/ha and above (Table 35). Clearly, in the rainfed areas where irrigation is a constraining factor to enhance yields, more efforts on research-development-extension (RDE) activities are needed to enhance yields at the medium technology level. However. given the relatively lower landholdings per farmer in non-irrigated areas. there will be more production and efficiency gains in the rice sector if the RDE activities of both national government (NG) and local government (LG) units will be focused on shifting the yield per hectare from less than 3.0 mt/ha to between 3.0 and above 5.0 mt/ha among rice irrigated areas.

51

Tahlc 34. Frequency 11istrihution of irrigated rice re.<po11de11ts' average land aretby yield levels and

hy season hefon and after the (;ATT-\VTO, Philippines.

Before (;ATT (crop year 1994-95) 1 After GATT (crop year 1996-97) 1

H'et .•.;eason Drv season

Yield Levels 1\ve L.m1d h-e- Percent A\.c La11J Frc-

area quu1cy area quency

(ha) (nu_) I" o) 01a) (Ill).)

Low·' 1.22 2!)X5 -15 1 12 1466

A1EDIUM 4 133 '2'275 49 l 29 1832

HIGH' \.1)8 315 7 l 18 405

ALL J.26 46.-5 100 J.21 3703

1 from 1995 GPHP Mid-Stream Evnluation. DA

2 from 1996-97 Rice-Based Fann Household Survey, DA-PhilRice 3 with palay yield of less than J.O tnt'hs'fa;:tlson 4

with polay yield ofJ.ll hut less than 5.0 mt/haiseason

~with palay yield of greater than 5.0 1nt1hu 'scag0n S.JU RCE STRIVE fOlDHlaticu, J9'N

YVet season Dry season

Percent Ave Land Fre- Percent Ave land Frc-

area que11cy area quency

(%) (ha) (no) ("o) (ha) (no.)

40 1.34 408 3:1 l 41 384

49 1'15 645 53 1 38 556

11 l 58 168 14 l 49 210

JOO J.J.i J22J JOO J.41 1150

Percent

(%)

33

48

18

100

Table 35. Frequency distribution of non-irrigated rice respondents' land area by yield levels and by season after the GATT-WTO,

Philippines.

After GATT (Crop Year 1996-97) 1

Wet sea.sun Dry season

Yield Levels Ave. land Frequency

area

(ha) (nos.)

LOW 2 0.91 234

MAJ.JJUM 3 0.88 107

H/Glf 4 0.85 JO

ALL 0.90 3.51

1 fron1 1996-97 Rice-Based Fam1 Household Survey. DA-PhilRice

2 with palay yield of less than 3.0 n1Vha/scason 1 with palay yield of3.0 but less than 5.0 mt/ha/se~lsun 4

with palay yield of greater than 5.0 n1Vha/i:;eason .SOURCE: STRJVR Foundation, 1999

Percent Ave. land Frequency

area

(%) (ha) (nos.)

67 0.83 236

30 0.88 66

3 0.38 14

100 0.112 316

Percent

(%)

75

21

4

100

4.1.4 Synthesis

Both the profitability and cost competitiveness analysis indicated that the relatively low levels of rice yields among the rice farmers are major contributory factors in the low levels of profitability and cost competitiveness. There were also indicators which showed that the relatively low levels of on farm profitability and cost competitiveness was exacerbated during the Post GATT-WTO period. This trend was also true in the findings of other studies (e.g., livestock sector) whose global competitiveness deteriorated after GATT (Gonzales, 1999).

To enhance net profitability and global competitiveness in the rice sector, the yield gaps ranging from 2.0 mt/ha during the wet season and 3.9 mt/ha during the dry season (Sebastian et al, 1999) need to be bridged by vigorously enhancing RDE activities at the farmers level.

4.2 Impact of Trade Liberalization5

4.2.1 Partial equilibrium analysis

The basic simulations assumed a three-year base period of 1995-1997, for rice domestic and border prices, production, consumption and production trading and handling costs. It also assumed demand and supply elasticities of-0.42 and 0.35 respectively. The base model parameters were also projected to 2004 to simulate the impact of GATT-WTO by2004.

Introduction

In the long term, trade liberalization would create an even playing field in the global market for goods and services. By allowing competition and entry of goods and services, it would promote efficiency in domestic industries, develop the ability to respond or adapt to changes, and build global competitiveness. The Philippines joined multilateral and regional groupings such as theAFTA-CEPT, BIMP-EAGA, APEC and GATT-WTO

to internalize the benefits of open trade with its trading partners. The Philippines, even before GATT-WTO, has been unilaterally implementing a tariff reform program for the past 13 years to enhance competitiveness. Executive Orders 264 and 288 have stated uniform tariffs of five percent for all non-sensitive agricultural and industrial products by the year 2004.

5 Also taken from Gonzales et al (2000)

54

As the year 2004 approaches, the tariffication of rice will have a major impact on food security. With a high Philippine rice import requirement and \Vi th more intense trade, rice imports will be brought in at cheaper prices than domestic rice. Without structural adjustments particularly in research and extension, improved transport and dsitribution system (e.g. bulk handling), and maintenance of irrigation system to make the domestic rice production more competitive, open trade will displace a large number of uncompetitive rice farmers from their subsistence and will funhermore make the country dependable to other countries on the supply of the major food requirement.

The openness in trading in the world market will generally lower the prices of commodities. With lower prices, consumers will benefit because of cheaper purchases. For the producers, they will also benefit through greater trading opportunities potential in the world market with fair treatments among countries. For rice. however, the problem lies in the thinness of the global market. Only three to four percent of total world product10n 1s traded. In addition, the world rice market is also segmented based on length of gram, aroma, percent broken, percent of amylose content, and general physical appearance.

On the domestic market, therefore, producers will have to be more efficient because of greater competition in terms oflower prices of rice imports. Though they will be able to alsoavail of cheaper rice production inputs, without structural adjustments and proper macro and sectoral policies, the farming sector will have difficulties m coping up with developed countries.

4.2.2 Welfare effects of trade liberalization

There are three major welfare effects of imposing and/or removmg tariff: benefits to producers (producer's surplus). benefits to consumers (consumers· surplus) and aggregate benefits to society (total societal welfare). A high tariff favors producers while a low tariff favors the consumers. The h·ade-offbetween producers and consumers surplus is the aggregate effects of the level of tariff to society. The rice tariff simulations for the base period ( 1995-1997) are shown in Figure 5. At zero tariff, producers surplus (PS) was P40 billion; consumers' surplus (CS), P124 billion; and total social benefit, P 164 billion. At 100 percent tariff, PS reached close to P 100 billion; CS, P4 l billion and total social welfare, Pl 39 billion. Clearly, the simulations showed that the optimum trade off between PS and CS is at rice tariff of 50-60 percent. At this tariff level, PS and CS are almost equal at P70 billion and total,social benefit at P140 billion (Figure 5).

55

180000000

160000000

140000000

~

5l 120000000

~ 0 0 ? 100000000 §

= Cf)

f-

-= 80000000 c "' "' c.. ,_h

60000000 u

40000000

20000000

0 ()

Figure 5. CS, PS and Total Social Benefit at base year (95-97)

10 20 30 40 50 60 70

Tariff Rates ('Y..)

80 90 JOO

IJCS

mPS

DTSB

Figure 6. Projected CS, PS and Total Social Benefit at 50% Tariff Rate, base year (1995-1997) to 2004

250000000

-;;;- 200000000

~ c.

~ V> ~ _,

"' "' 150000000

f...

"' ; ,,, .. v5 u 100000000

95-97 1998 1999 2000 2001 2002 ]()II \ 2004

Year

The 1995-1997 base was projected to 2004 and results indicated that at 50 percent tariff, total social benefit was projected to reach P260 billion and PS and CS close to a level of Pl 25 bi I hon each (Figure 6).

4.2.3 Efficiency implications

There are also efficiency losses with high tariff impositions. Protection has led to deadwe1ght losses of efficiency in production and in consumption due to misallocation of productive resources and of consumption expenditures.

At the 1995-1997 base year, no losses are incurred in both production and consumption at the free trade price situation. But as import price is increased by 10 percent, net efficiency losses are incurred (P79 million and 219 million in net efficiency loss in production and consumption, respectively). Further increasing the import pnce by 100 percent would result in an 8 million net efficiency loss in production and a P22 billion net efficiency loss in consumption (Table 36),

This trend holds true with the projected years until 2004 wherein at the free trade situation, there are no efficiency losses. As the tariffs are increased, net efficiency losses are likewise increased.

Table 36. ~et efficiency losses in production and consumption at different tariff rates,

Base Year (1995-1997)

Tariff Rate

0

10

20

30

40

50

60

70

80

90

100

SOURCE: STRIVE Foundation, 1999

NELc

0

218,902

875,608

1,970, \ 17

3,502,430

5,472,548

7,880,469

10,726,193

14,009,722

\7,731,054

21,890, 191

58

NELp

in '000 pesos

0

79,291

J 17, 164

713,618

\ ,268,655

\ ,982,273

2,854,473

3,885,255

5,074,618

6,422,564

7,929,091

4.3 Impact of the Asian Financial Crisis on the Rice Sector6

This section compares the financial profitability of the rice-rice farrmng systems (using costs and returns analysis) as indicated by the net profit levels (on-farm and at wholesale), and per unit income (expressed in peso per metric ton). The per unit income, which was derived by di vi ding the net income by yield level, was included in the analysis to isolate the increasing/decreasing effect of varying yields on net farm and wholesale incomes, when comparing two different time periods.

Two scenarios were compared in the analysis: before (1996-1997) and after ( 1998-1999) the peso devaluation. The pre-devaluation period used the compiled database on the 1996-1997 rice-based farm household survey of DA-PhilRice and the 1996-97 updated costs and returns publication of BAS. The 1998-99 rice farn1 record keeping survey of PhilRice, the 1998-99 rice-based survey of STRIVE and the 1998-99 rice­based survey of PhilRice represented the post-devaluation scenario.

The rice-rice sample respondents were disaggregated by agro-ecological system (irrigated and rainfed), crop establishment (transplanted and direct seeded), technology levels (high, medium and low), cropping season (wet and dry) and major producing provinces. Nine provinces with rice-based activities were covered by the analysis. These are Ilocos Norte, Pangasinan, Isabela, Laguna, Camarines Sur, Nueva Ecija, Iloilo, North Cotabato and South Cotabato. An aggregation of the nine provinces was included to represent a national farm to wholesale costs and returns analysis.

4.3.1 Impact on profitability

Two levels of profitability impact, one on farm level and the other at wholesale, were estimated for the rice-rice cropping systems. The farm level profitabilities before and after devaluation are shown in Table 37. The impact of the financial crisis on profitability of rice farm was generally negative across provinces during the wet season but mixed by provinces during the dry season. Wet season profitability of rice farms at low technology levels had the highest negative effect.

During the dry season, the profitability impact of devaluation on farm with higher yields was generally positive, regardless of agro-ecology and crop establishments. However, at low technology levels, the overall effect on net farm incomes was negative (Table 37).

'General results based on Gonzales and STRIVE Staff(2000)

59

Table 37. General unpact ofpeg,1 devaluation on Farm Le't'e/ Profitability of nee-nee farnung sy~tem~ by technllh)gy, by croppping pattern. by sea.5on and by province.

Chpplq

Pan~rn

RICE.RICE

Non-Ini~l•d

...... Pn'IM

D9e•l'lert• I bmbd• I l'fwcvaEdla I

befon 2,73:5 1,970 2,863 1,889 2.9711 Lew Yield .rter 1,620 2.om 2.006 1.:536 <!,HI

%dumre -41 2 ~· -19 -15

before 2.786 2.629 3.20:S 3,332 3,735 Ms11u111 Yield ~ 2,390 2.307 3,3~ 2,991 j.66'.S

TransplantM % dlfrnre -14 -12 J -10 -2

before 3,486 3.763 3,97-4 -4,169 High Yitid ~r 3,784 3,2'2 3.734 J,687 -4,009

9' chanre -7 -1 -7

1.728 2.170 1,791

.J.078 2.666 4.185 2.293 2,2:52 -16 -16

3,718 4.674

4.325

·---- Dollo

Wet Dry

-----net f.-m income (Plrnt)-----

1,787 1.628 -9

.. , 2,029 JIU

.. 8

3,048 2.905 2..291 3,223 2,444 1,777

6 -16 -23

3.2n 4,-485 ,,

2;510 2.062 .JI

2,865 3,338 2.1"43 2.:536

3.1-49 3,042 _,

-U

3.584

2.714 1.334 -51

3,299 2.766 -16

4,334 3,539 -11

818 -211 -116

3.2J7

j.672 1.579 _,, 3,91] 3,398 -13

-4,143

1,806 1,157 -06

3.9lS7 3,561 -JJ

2,636 1,718 -35

1,509 1.268 -J6

3.229 3,l:s4 2,917 2,69' -10 -17

3,738 3,527 .. 3,704

3,915 6

befon 2.771 2,'.5:57 3,252 3.090 j,919 3.333 2,691 4,300 2.674 2,685 1,7:58 2.293 3,301 2,349 _,.

3,359 2,499 3,822 3.746

-2

3,642 3,105 -15

3.240 3,115 AJ/ Yreld lifter 2,668 2,376 3,007 2,776 3.769 3.723 2.242 2,723 2,897

9' drante -J -7 -4 -10 -3 12 -17 2 '

Luw Yteld

bof~

M.drumYurld

before H1gli Yreld .tb:r

"'dttatp

before 2,431 Ww Yreld lfter 1.873

"dianp -23

before 2.-462 M"11um Yreld lifter 2,689

Trun5Pl.antnl % dlange 9

bof~

High Yi~d tfter -4,0S8 "dump

before 2,-453 AJI Yrt:ld ltter 2,103

"ditmge -1-l

3,194 '1.57-4 2.309 -JO

2,294 1,.846 -20

2,559 2,093 -JI

3,229 2,913 3,659 :),189 2,575 3,42'.'i 3.372 3.030 4,356 2,741 'i,391

.'17 6 57

3,698 ".0111 3.372 ],400 4,-481 3,812 4,07'.5 'i,506

' 21 "' 3,217 3,191; 3.817 3,198 2.707 -4.246

3.0Z7 -5

4,102 2,321 '.'i,J26 21 -U 2J

2,783 3,193 2,259 1,.878 2,857 2.882 1,391

3 -1!J 6

3,122 •.710 3,-472 4,120 3,197 'i,OS6 1,737

2 7 I

3,841 3,974 4,205

6

3.447 3,817 3,429 2.804 2,811 -4,0'iO 3.]30 -II 6 -3

1,619 l,'.'i26 .. 1,810 l,718 .j

1,737 1,64:5

..J

1,456 2,433 2,7:s4 2,696 2,6S4 -17 6 -JI -17 -!J

1.616 1.0:51 _,,

1.:582 i.1n 35

2,904 663 2,3'.'il 8S2 3,13'.5 2,'i79 2,421

2,671 U7-4

1.:5-49 .. , -42

1,754 -1,374 1,187 ·2.643 2.295 -JO -307 -JO -110 -27

1,763 2,336 2,.265 2;S38 3,364 2,967 3,190 3.688 2,953 3,002 1,365 2,672 2,3'.'i6 2,20.8 2,928 3.1A·3 3,3-41 3.254 2.669 3,359 ~ u • ~ ~ • ~ ~ ~ n

2,9"7 3.137

6

1,713 1,962 2,634 1,612 1,309 2,863 2..239 23-4 -U ~6 -lJ -45

2.897 2.177 2,225 2,350 2,011 -19 -4

3,606 3.819 3.536 3,176 2,82-4 -12 -20

-4.011 -4,318

I

3,.289 3,160 3,074 2,8<11 3,-459 -15 JJ

3,-496 3.290 3,570 4.756 3,268 3,657 3,063 3,857 4.J12 3.2:55 3,990 -12 ' -9 0 9

3.184 2.:501 2,6-44 .... 78 -17 -119

3,0:s4 1,934 ..37

3,326

3,.241

3.666 3,3'i3

-9

3.762

3.999 3.786 .j

3,940

3,701 •,301 -11

2,958 3,006 2,51'.'i 3,161 -15 j

2.683 2.477 2.200 2,867 -11 16

3.ln 3.809 2,91'.5 ,,827

_, 27

3,681 3,71" , 3.061 3,161 2,646 -4,166 -14 $1

f-~~~+--~~~-1--~~-+-~__,r-~-+-~__,r-~-+-~__,r-~-+-~~r-~-+-~__,r-~-+-~__,r-~-+-~~r-~-+-~__,r--~-+-~__,r--~-+-~__,r-~1 before

Low Yield lfler %dumge

before Madtum Yield tftn:

Diffd Seeded % dtange

befon

2,902 -130 2.94R 3.760 -215 66

3,6SS

3,778 ,,J69 -4,523

' 3.582 3.6"2 ....... b-:5

J,no ..

1,63-4 1,023 2,234 1,.296 2,227 22'.5 ·310 2,037 768 -46 -1$0 -9 -41

'99 -274 -U6

3,021 2,731 -10

3,364 2.258 2,492 1,754 -26 -22

1,833 730 ...

2,919 2,6X1 -10

2,720 2,929 2.460 2.733 3.722 3,699 2,974 3,074

2.1:56 l,'.'i35 -29

2,42~

2.31'.'i 4,904 .. 79

2.65-4. 2,62'.'i

-1

1,670 2,439 1,742 2.435 Z.303

0 ,,

4,501 1.8U -15

2,742 3.1.&0 3,&40 -26 6 2J

3,465 4,090 3.063 4,294 -12 5

3.124 3,'ilO 2.720 2,454 3.:S6.2 2,819 2,649 2,982 -I -20 -$ 22

SOIJkCE SlllJ\/E Founda11on, 1999

At wholesale leveL the general impact of peso devaluation on net wholesale profitability was positive across agro-ecology, method of crop establishment and technology levels. The percent change from the period before devaluation ranged from a low of 7 to 18 percent during the wet season and 12-36 percent during the dry season (Table 38).

4.3.2 Impact on Output Prices

The impact of the peso devaluation on farm gate prices of palay and wholesale prices of rice averaged 4 percent and 12 percent respectively during the wet season (Table 39) and 2 percent and 12 percent, respectively during the dry season (Table 40).

Devaluation also affected input prices that are used in the rice industry. The empirical findings of the STRIVE Study showed that on the average, input prices increased during the first season after devaluation. The percent increase on input prices during the first season ranged from 1 to 89 percent. Notably, palay seed, fuel and oil, fertilizer and mill mg costs accelerated after the devaluation (Table 41 ).

During the dry season, input prices showed an increasing trend on the average after the devaluation with seeds, fertilizer, rice milling and distribution topping the input price increases. Surprisingly, labor and fuel cost, for the Philippines as a whole, declined by 4 and l percent, respectively (Table 42). However, these cost declines were only significant in the provinces of Laguna, Nueva Ecija, Isabela, Iloilo and North Cotabato (Table 42).

4.3.3 Synthesis

In summary, the net profitability impacts of devaluation on the rice-rice cropping systems were negative on farm and positive at wholesale due to two primary reasons: one was the relatively small percent increase (2-4%) of rice farm gate prices relative to rice wholesale prices (percent increase of 12% after devaluation). The other reason was the higher increases in input prices at the farm level creating a cost-price squeeze on net profitability.

61

Table .rn Ciencrnl mipact of peso dcvuluation on J¥holesale Level Profitability of rice-rice: fnrnnnl!: systems by tectmology, by t:ruppping pattern, by season and by province

Cropping

RICE-Rff'E

Agru­

cology

lrrlgoaled

N•m-ITrig,;i.ttd

Cropbtsb-- Yldd

i.~•

I Nuevs Ed • I 1•-••• CamwlnuSu.r llotlo NoMh Co<ml)•o South Cotllh..to

Puiod

~fore 6.312 4-.628 7,220 5,413 6 . .>% 4.766 ~,946

Li:JwYie!d 5,137 6,323 7.2'if' 6,525 6,98'> 6.241 % d>angll -9 37 5

befme 6,392 Af'-"rllm Yield dter 6,923

Trun<:plant~d % change 4

5,642 6,785 20

7,746 9,33.2 w

7,633 8,763

13

7.562 li,74-t 16

6,843 7,054

3

6,709 6.9~1

Dry

R,277

~fore 6,961 8,604 8,622 8 . .!2\1 7,827 7,310 8,492 High 'freld .Cler 9,067 8,223 9,917 9,834 9.271> 10,716 &,535

% change Ill H 1.'I 51 17

Wo LRy &y

------11etv..bole~•le income (P/m()-----·

7,3&8 6,073 5,973 5,EiOCf 5,342 3.622 8,465 9,214- 7,282 6,395 5,9t)g

52 22

9.328 9.016 10,919 9,8'i4

17 9

9,5&8 l2,99-'I

36

7,986 8,553 6,617 R,9'iCf 10,241 6,698

12 20

8,990 6,9').4. 10,547

17

Iffy Dry

6,442 3.694 6,593 3,331 6,62'.'i 4.785

5.9~ 'i,905 3,626 4,717 4.078 6.552 -2'

7,342 &,109 10

S,9..15 9,297

7,416

8,68:.!

6,693 9,084

7.B6 8,3%

11

7,46\.' 8,161

8,320 8,161 9.335 10,040 12 23

h<for" 6,368 '.5,531 7,&lli 7262 7.845 7,236 9,254

6,747 6,937

8,453 8,75:.; 8,677 7,158 7,674 6,559 6,4-10

-2

7,4-U 6,230 6.824 8,090 8,071

6,162 7,554 R,176 8,056

1,255 8,100 12

1fter 7,350 6,891 8,796 8,432 8,940 %d1anµ JS 25 13 16 u "

bcfon

% change

t..fme MednimY1e/d 1fter

Dfred Seeded % chanre

before Hrgh Yreld after

All 'r'1dd

%change

before 1ft10r

%d1anµ

bef<nc 5,844

Lew Y•rt:ld ~fter 6.128 %dranµ 5

~fore 5,893 Mmatm Yield .Ctu 7,382

Trunspluntl!'d % change 2J

befoie Hr8" Yreld after 9,4RR

% dla11ge

btf<ne '5,f!7R All Yreld 6,482

%change JO

before

before Mmfllm y,efd lifter

Dir<"d Seeded % drange

Hr8" Y11dd :aftu % dlan[/'!'

btforc All Y1dd

7,719 6,467 t,sJs 6,137 l,7n 7,713 19

6.317 &,31)6

7,783 6,990 7,445 7,013 6,S69 7,106 9,359 &,&23 10,228 7,705 ll,382 w .16 JJ 60

8.1% R,021 10,007

t2

7,764 6,980 7,6JSJS 8,819

1,295 '1.795 ,, 7,0"£1 9,837

'° 6789 fi,728 5,583

7,061 8,558 7.54-j 7,205 26 12 29

7,618 9,753 7.1">7 R.4>16 9.089 ll,940 8,858

22 u 8,72-'1 7.929

9.ns 21

8,118 8379 7,090 6,412 8,4% 10,393 8,.!:H

j 24 16

1:Z79 :l,J08 6,3'51 7.893 3,831

66

8,627 9,229 11.120

20

8,326 8,110 9.9..ll

7,U.!3

7,&38 8,7'.H n,n8

.'f2

6,772 8,370 7 .0~7 11,:180

4 -~5

10,150 ioyrn 8,466 9,611 16 22 Jll 2.5 9 18 33

7.129 8,308

F

7,423 8,603

16

7.311 8,490

16

6,939 6,579 5,949 3,440 S.8&.4 3,747 5,766 4,Yl7 f\/i7R 4,847 5,409 12

7,843 9,140 5,495 1,805 5,679 -113 5,84.0 6,560 6,638

13 J9 -48 -103 .Ji -1

7,165 7,739 8,326 9,977 16 29

4,965 6.421 29

6,014 7,621

27

7,089 7,164 5,533 8,240 10,271 6,241 16 i/3 13

8,910 7,49'.'.i 4-,904 9,841 8,035

10 '

10,001 I0,021 6,920 11,112 7,140

11 3

7,652 9,440 2'

9.SU 9,007 6,210 10,544 8,117

11 :Jl

6,324 7,316 16

4,899 4,279 -13

7,«2 8,358 12

7,000 6,774 8,789 7,448 26 JO

6.232 7.112 1'15'i9 8Jll~

7,081 9,185

7,645 7,497 6,-'!% 7,87'i 7,596 li,089

S,565 12

7,165' 7.921 11

6,965 C'i,829 -2

7.384

7,253

8,24-2 10,646 8,917 Hl,J'i'i 211 35 26

6,283 6,~84 6,253 3,218 7.467 8,614 -19 u 38

6,730

7,096 1:..133 15

7,005

7,121

7,~77

7,088 8,880 13

6,697 6.274 7,294 8,428

9 _u

7,4'56 11,124-8,393 11,442

H .i?

8,232 9,715

18

1,2n 1.299 7,980 9,935'

10 36

6,966 5,71.fJ "4,917 4,41.> 5,692 3.351 5,591 5.73:5 6,042 5,283

6,'572 4,464 5.930 5,l01 3,:532 6,510 7,380 6,607 5,139 ~ ~ U 16 5 M 19 9 d

8,944 10,267

H

7,771 8,587

11

'i,666 6,926 6,051 6,640 6,670 6,250 7,144 7.192 7,414 ll,49li 7,765 8,739 9,9.24

6.350 7,R91 u

5,212 4.989 6,019 7.5'99

26

7J 22 311

7,867 1:.,175

' 5,ll6 6,672 5,959 7,496 7,71:.8 7.883

i/7 17

7,900 8,H6 8,62.! 10,622

9 21

6,754 1,9&4-

18

6,219 8,604 38

~OTJRC'E ".TRI\'E Fmmd•t1on, 199'1

0\ w

Table 39. Comparativepalay farmgate and rice wholesale prices before (crop year 1996-97)

and after (crop year 1998-99) the peso devaluation by province,wet season, Philippines.

Farmgate price (P/kg) Wholesale price (P /kg) 1

PROVINCE Before After % Change Before After %Change devaluation devaluation devaluation devaluation

llocos Norte 7.80 8.20 5 17.00 19.00 12

Pangasinan 7.90 8.20 4 17.00 19.00 12

Isa be la 8.00 8.30 4 17.00 19.00 12

Nueva Ecija 7.90 8.50 8 17.00 19.00 12

Laguna 7.19 7.54 5 17.00 19.00 12

Camarines Sur 6.94 6.97 0 17.00 19.00 12

lloilo 8.12 8.40 3 17.00 19.00 12

North Cotabato 7.55 7.65 1 17.00 19.00 12

South Cotabato 8.36 8.60 3 17.00 19.00 12

Philippines 7.75 8.04 4 17.00 19.00 12

1 based in Manila SCJTJRCE: STRIVE Foundation, 1999

Tahle 40. Comparativepalay farmgate and rice wholesale prices before (crop year 1996-97)

and after (crop year 1998-99) the peso devaluation hy province.dry season, Philippines.

Farmgate price (P/kg) Wholesale price (P /kg) 1

PROVINCE Before After 0/ii Change Before After % Change

devaluation devaluation devaluation devaluatio11

Ilocos Norte 8.13 8.20 I 17.00 19.00 12

Pangasinan 8.10 8.20 1 17.00 19.00 12

lsabela 7.81 8.03 3 17.00 19.00 12

Nueva Ecija 8.40 8.76 4 17.00 19.00 12

Laguna 7.25 7.46 3 17.00 19.00 12

Camarines Sur 7.14 7.21 1 17.00 19.00 12

Iloilo 7.51 7.67 2 17.00 19.00 12

North Cotabato 7.44 7.58 2 17.00 19.00 12

South Cotabato 8.61 8.60 0 17.00 19.00 I!

Philippines 7.82 7.97 2 17.00 19.00 12

1 based in Manila

SOURCE: STRIVE Foundation, 1999

Table 41. Comparative majorrice input prices before (crop year 1996-97) and after (crop year 1998-99) the peso devn.lun.tion by province,

wet season, Philippines.

JTFM

Producti-on costs

Seed (Plkg)

Fertilizer (P/kg)

Chernical (Plliter)

Fuel lVld oil (P!kg of palay)

Labor (P/manday)

Total production cost (P/kg ofpalay)

Processing/Milling Cost (Plkg of rice)

Ma1i<:etin_g/Distribution Cost (P/kg of rice)

ITEM

Prolhtctfo·n costs

Soed (Pikg)

Fertilizer (PJkg)

Oiemical (Plliter)

Fuel and oil (P/kg ofpalay)

Labor (P/manday)

Total production c-ost (Plkg o-fpalay)

Proce$ing/Milling Cost (Plkg ofrice)

Marketing/Distribution Cost (Plkg of rice)

SOURCE- STRIVE fow1dation, 1999

DocosNorte Pana..sfnan

Before After % Before 4Jter %

deva- deva- Cll.ange deva- deva- Oi..mge

luation luaticm luation luatiun

8.29

6.43

879

0.05

104

5.18

U.75

2.15

12.38

7.52

467

025

163

5.76

0.84

2.30

Camar1nes Sur

49

17

-47

366

57

Il

12

9.47

7.97

708

0.07

121

4.52

0.75

1.2&

Before After % Before deva- deva- O..ange deva-

luation luation luah"on

10.52

7.55

503

0.19

130

4.69

0,75

1.12

12.91

7.25

528

021

91

515

0.&4

1.20

23

-4

-30

JO

12

8.51

6.12

547

0.14

113

524

0.75

22&

13.82

9.?S

863

0.38

158

5.28

0.84

1.37

Dolio

Afl" deva-luation

14.5&

6.88

556

0.15

127

567

0.84

2.44

46

22

417

31

17

12

%

Ch<1:0ge

71

12

12

12

Before deva-

lsabeht Aft<' deva-

luati'on /uation

10.41

7.62

575

0.07

136

4.31

0.75

2.13

15.6'

&.00

578

0.10

181

4.67

0.84

228

%

Cli.ange

50

41

33

12

North Cotabato Before After % de11a- deva- Change

luation Juation

9 J7

6.50

649

0.04

123

4.46

0.75

237

11.51

7.21

605

0.02

160

505

084

2.54

23

11

-7

-61

30

13

12

NuevaEc_lja Before After % devn- dP.Vn- Ornnge

luation luation

J0.66

6.07

512

0.13

122

520

0.75

1.49

14.77

7.12

518

0.24

144

5.97

0 84

1.60

South Cotahato

_,. 17

84

18

15

12

Before After % dcva- deva- Cliange

/uat£on luation

10.20

6.85

502

131

4-57

0.75

2.45

13.51

726

601

179

5_03

084

2.62

32

20

37

JO

12

Defore deva­

luation

&.07

6.30

506

0.02

199

4.98

0.75

0.55

l.aJJUR3

Ajl« dei'fl­

Juation

10.03

7.11

704

0.02

109

5.35

0_84

0-59

Phllllnnlnes

C11:~nge

13

39

-45

ll

Before After % deva- dITTfa• c.1uingc

luation lua1io11

9.50

6.82

598

0,09

131

4.80

0.75

1.76

IJ.24

7 57

602

0.17

14<>

53;

0_84

urn

39

II

89

JI

JI

12

Table 42. Comparative majoirice input prices before (crop year 1996-97) and after (crop year the 1998-99) peso devaluation by province, dry season, Philippines.

Ilocos Norte Pan~lnan ls ab el a NuevaEclla ITEM Bef.Ore After '/o Before After % Before After % Before After

deva- deva- dlangc deva- deva- Ot<!llgc dtn1a- deva- Oiangc deva- dtlla-luatfon /11ati011 /uatlon luation luation luation /uation luation

Production costs

Seed(Pi'l<2) 8.68 12.38 43 9.32 13.82 48 10.53 11.06 5 10.73 11.06

Fertilizer (Plkg) 6.59 7.52 14 7.13 9.78 37 7.63 &30 .9 62& 6.90

Cllemical (P!liter) 1031 467.00 -55 684 &63 26 520 726 40 466 526

Fuel and oil (P!l<g ofpalay) 0.07 0.07 7 0.19 020 7 0.10 0.09 -7 0.11 0.09

Labor (P/manday) 105 163 55 127 15& 24 147 94 -36 124 94

Total production cost (Plkg ofpalay) 5.57 5.82 5 4.74 4.81 2 4.65 4.11 -12 4.13 3.43

ProGess:ing/Milling C..ost (Plkg of rice) 0.75 0&4 11 0.75 0.84 ll 0.75 0.84 12 0.75 0.84

Marketing/Distribution Cost (Plkg of rice) 2.15 2.30 7 128 1.37 7 2.13 2.28 7 1.49 1.60

% Change

3

JO

13

-17

-24

-17

12

7

Camarlaes S•r Dollo North Cotabato South Cotabato ITEM Before Aft ... % Before After % Before Aft"' % Before After %

deva- deva- Oumgc dtn1a- deva- au111gc deva- deva- Otangc deva- dcva- Oiange luatt"on luation luati°<:m /uatt'on luati"on luatlon luation /uation

Production cost;;:

Seed (P/kg) 10.55 12.91 22 8.36 12.00 44 9.38 12.19 30 8.94 13.51 51

Fertilizer (Ptkg) 6.98 725 4 6.50 6.76 4 6.00 6.49 8 6.34 726 14

Oicmical (P/litcr) 462 528 14 552 676 22 480 589 23 690 601 -13

Fuel and oil (P/kg o-fpalay) 023 0.32 36 0.18 0.10 -47 0.13 0.18 40

Labor (P/m;mday) 126 91 -28 129 124 -4 131 80 -39 129 179 39

Total production cost (P/kg ofpalay) 4.66 4.57 -2 5.87 7.44 27 5.11 6.66 30 4.99 5.51 JO

Processing/Milling Cost (P/kg of rice) 0.75 0.84 12 0.75 0.&4 12 0.15 0.&4 12 0.75 0.84 12

M<11-keting/Distribution Cost (Plkg of rice) l.12 120 7 228 2.44 7 2.37 254 7 2.45 2.62 7

SOURCE_ STRIVE Foundation, 1999

L1wuna Before Ajler % dtnta- deva- Ornnge

luation luation

8.31 10.03 21

627 7.ll Jj

539 704 31

0.07 001 -&9

116 109 -6

4.57 456 0

0.75 0.&4 12

0.55 0.59 7

Phillonlnes

Before Aft"' % deva- deva- Cll:t11ge

luah'on luation

9.42 12.11 28

6.64 7.49 n 603 631 5

O.U O.U -1

126 121 -4

4.92 521 6

0.75 0.84 12

1.76 1.&& 7

5.0 FOOD SECURITY, RICE SELF - SUFFICIENCY POLICY, REVISITED

5.1 Definitions

5.1.1 Food security

Food security can be loosely defined as the availability, accessibility and affordability of food at all times, across all areas, income groups and members of individual households. As defined by FAO, it could also mean a situation in which all people at all times have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life (FAO, 1996). This FAO definition has three dimensions:

);- Availability -on the average, sufficient food supplies should be available to meet consumption needs;

);- Stability - the minimization of the probability that in different years or seasons, food consumption might fall below consumption requirements; and

);- Access - draws attention to the fact that even with available supplies, many individuals still go hungry because they are poor and unable to produce and/or purchase the food they need.

Food security is a key development issue because access to food is an inherent human right. Food nutritional intake is the most basic indicator of the quality oflife. Food security is likewise a strategic issue. It brings to fore the dynamic interactions of population, urbanization and levels of incomes with food production, utilization of natural resource endowments and technology.

5.1.2. Self-sufficiency versus self-reliance

There are two broad options to achieve food security at the national/country level: food self-sufficiency and food self-reliance. Food self-sufficiency implies meeting food needs,

67

as much as possible from domestic supplies and minimizing trade. Food self-reliance on the other hand, takes into account the role of international trade as needed to supplement domestic level of food production.

In the Philippines, the attainment of food security as a development goal, hinges on the agricultural sector. In particufar, the rice subsector has been historically the center point in the achievement of food security goals. Food security has been operationally interpreted at the rice subsector level as rice self-sufficiency. Past rice government programs, with the exception of Gintong Ani rice in 1996, had all explicitly expressed rice self-sufficiency as their major goal (STRIVE, 1999). But should the rice self­sufficiency program be the policy strategy to attain food security in the third millennium'l The answer to this question can be deduced after examining the performance of the rice sector and past government rice programs.

5.2 General Performance of the Rice Subsector

Over the past thirty (30) years, the performance of the rice subsector was dismal m terms of rice production (domestic supply) versus rice utilization. There were 20 deficit years as compared to 10 surpl~s years (Figure 3). Imports historically averaged from a range of 1 to 14 percent of production, except during the 1998 El Nino year wherein rice imports reached its highest level of 2.1 million, m.t. or 3 8% of domestic supply (Figure 4).

Several reasons could account for the poor performance of the rice subsector. These factors are highlighted below7

:

5.2.1 Rice programs are underfunded

'r 1997 GPEP, rice, budget of P8.4 B, compared to P90 B revenue it generated in the same year. Makainasa Rice programs were funded P2.0 B in 2000 and P2.5 B in 2001.

? it was only during the early years of Martial law ( 1972-1977) when the M' 99 had enormous budgetary support, resulting to surplus years from 1978tol983.

'r The rice programs are not advocated very well - despite underfunding, the programs were still "rice self-sufficiency".

'Condensed from Gonzales, 1999

68

5.2.2 The macro and sectoral policy environment was not very favorable to the rice sector

~ Policy bias in favor of the industrial sector Smaller allocation of investment funds to the agricultural sector resulting to neglect and deterioration of public mvestments (roads, irrigation, other infrastructure) Overvaluation of the peso before 1997 High cost agriculture (rice) sector squeezing net profitability on farm Safety nets for domestic compliance under GATT-WTO not in place

Rice pricing policy detrimental to rice sector Floor and ceiling prices have urban biases and threaten the financial sustainability of the rice sector Inefficient marketing distribution systems Terms of trade (prices of inputs rise faster than price of rice) have deteriorated in the rice subsector

5.2.3 High population rate of growth partly contributes to lower per capita self-sufficiency

~ Rice is the major staple ~ Per capita consumption declines because of limited supply growth

5.2.4 Rice technolog~ is available but the )ie\d gaps on farmers' fields and experimental farms are still large:

);> Irrigated yield gap: 2.45-3.0 mt/ha.

~ Rainfed yield gap: 3.48-5.5 mt/ha.

- support and extension services are not adequate, deteriorating in the past 10 years due in part to the Local Government Code which devolved the extension system

- credit inaccessibility resulted to non-optimization of input utilization (e.g. fertilizer) to enhance yield

69

5.2.5 Depletion of prime ag11icultural lands due to the high demand from the commercial and industrial sectors.

';- Land use conversion of prime lands unchecked

5.3 Why Rice Self Sufficiency?

Clearly, the rice subsector failed to attain its rice self-sufficiency objective due to the variety of reasons mentioned above. Among the reasons cited, the most pervasive was the underfunding and decline in annual budgetary support to the rice programs despite the proportionate annual increases in population. This budgetary deficit was responsible in the inability of the public sector (DA) to respond favorably in the attainment of rice self­sufficiency. In the short to medium term, under the current economic environment, the author is of the view that there is still socio-political and economic logic to pursue rice self­suffic1ency as a strategy for food security. In the medium to long term, when income growth is positive and diversified sources of employment become sustainable. then food (nee) self-reliance can be explored as a maJor policy. However, while these economic structures are not yet in place, rice self sufficiency should be vigorously pursued as a policy, with a clear understanding of the direct and indirect cost of such po hey and the alternative trade offs to such a policy be defined. Some of the reasons for pursuing a nee self-sufficiency program are discussed in the following section.

5.4 Rationale for a Rice Self Sufficiency Program

There are at least seven (7) major arguments why we need to pursue a rice self-sufficiency program. They are discussed below:

5.4.1. The economic significance of rice

r Contribution of rice to agricultural and national economic grov.ih r ~ultiplier effects of a broad based (rice-based) development in terms

of rural sectors' demand for industrial goods and services r Staple rice economy is a source of national pride among Asians includ­

ing Filipinos

5.4.2. Political stability

,. Political stability is priceless ,. Rice crises (e.g. 1970s, 1995 and 1998) can destabilize a political regime r Thmness of the nee mtemational market r Good rice policy is good politics

70

5.4.3. Rice technology is in place, unfortunately the policy environ­ment has not been favorable for its total adoption

}> Open pollinated varieties (OPVs) Y Improved inbreds }> Hybrids >- Transgenics >- Research institutions in the Philippines a re able to generate the

appropriate technologies (Table 43).

5.4.4. Rice deficit situation is area specific, seasonal and can be solved with devolution and participatory regional rice supply-demand management

}> The seasonal rice peak supply is during the last quarter of the year }> The seasonal low supply is during the third quarter of the year }> Deficit areas are localized (Table 44):

'Y National Capital Region: 783,000 mt }> Big Luzon Island: 249,000 mt >- Visayas Island: 153 ,000 mt

}> Surplus areas: }> Mindanao Regions: 38,000 mt

5.4.5. Rice self-sufficiency program will allow us to test the effectiveness of the safety net measures promised by the government under the gatt-wto accession:

>- Hard physical infrastructures: farm to market roads, telecommunications. support services

? Research and development > Technical Assistance from members of APEC

5.4.6. A rice self-sufficiency program will allow us to benchmark and enhance global competitiveness in selected areas

> Land resource > Fertilizer use > Irrigation development 'Y Technology Y Cost efficiency

71

Table 43. PSB and other popular rice varieties (As of June, 2000) AGRONOMIC CHARACTERISTICS DISEASE & INSECT PEST REACTlONS*

Variel~' Blast Developed Year A\·e Yield M:n: Yield Growth

br Relused Hilla) ft/ha) Dur.1tion Bacterial

blight Tungro BPH GLH

191•.•· 4.!. i)·', )~j.K:;I f PIH'R ,,,.,1 >f''i gn i;Tfjfaj~~~~fr'.'J"~I 1'· '1 ~S;j{ ,·::.fl( 110 R R S S R 197i 5.0

IR 60 BPI Ri lR6:? IRM !R6b

1983 4.8 ~ R R R R R

BPI Ri 12 lR 58 IR 72 IR 74 PSB Rc2 (N<1h<1li11J f'S13.RM{Mola\.\·in) PSB Rc6 (Carr<1nglanl PSB Re& {T .1l<1vcr.1) PSB Re IO (Pagrn1jan) l'SBR<l<(Afu) PSB RdOCChicoi i1SB Rc22 (Liliw1 PSl3 R'26l I ( t>ifag~o P813 Rt:ls.ciwno) PSB RcJO (Agusl PSB Rd2 (Jarn_1 PSB Rc34 (811rd.igol' V~B R.::52 (Gmulmu) PSB Rc5~ (Abrn) PSB Ro6(Dapita11i PSB RcS8 (M<1yapa1 l'SBRC<54(1(,j,""!l) PSB Rc66 (Agusa11j PSB Rc72H (Mc~ti~o~ PSB Rc74 (Aklan) l'SBi¥:76ll(Jl-.iii¥:ri: PSB Rc78 (Pamp~uga; PSB Rc80 (P.isig) P~B ~l [hi11w:~Ua)

UPl.."Ri .i BPI Ri I Ri 6-5

!'SB R,cJ~ (6'lirnra) PSB Re J.J (Rio Gr~ndc~ PSB Re 36 ( Ma·ayon'

IRRI !RRI IRRI

UPLB iRRl IRR1 IRRI

UPLB PHILRICE

IRRl JRRI

PHILRICE UPLB ijOO

PHILRICE IRRI UPLB

_A~etl ?HILRICE

JRRI

1992 1994 1994 1994 ]994

1.995 199;1 1995 i99:i 19'J7 i997 1997 1997 19n

!Rl\1 ........• ·'''"" •. , ••

~!PW 1971/"' BPI 1979 IRRI 19S5

lJPIJ~ 1 ;1'192 UPLB 1992

PHILRJCE 1995

~.O

~.6

iCi 5.0 5.2 4-S 5J

< 5.0 ~.3

,.I4.o 43 4.7

'H·.;c"::'·'I'·' 3.6 Jl

7.5 106 8J 123 71 111 71 129 " 7.6 llU " 7.6 111 93 80 118 88 88 112 9' !OJ 12~ IOI .5) 115 <6 66 113 91

7.5 114 88

, .. , ... 1 >MS:'.A\~:i' :.'MR"' R R

11; R R

RAINFED LOwLANb iTRANSPLAN'i'Ebl ffi.P:' '109 nr:X:')i?::<':<:;:':: i~2:Y' '2~(4;· pg~~ 6.1 !10 92 I I s 5.3 127 121 r I MS

PSB Re 38 (Rinara) : l'HILR[(;E ,;199$.: 'ut:··,' : .::ill'' :(Ill , . ..,.;r·119,;;;;:;' ·hiJ. ''Af~(J:;;.t.tl:f:;···: PSB Re 40 1: Clmyong:: PH!LRICE 1995 J.r 4.9 130 126 R I MS

H.: RliNRED.(DRY·SEEbEbi

,J.f' s' Pf.l.skc 16'((4maoo} PHllJ\l'E llJ?J ;-1.T- 125 rJlz, , I PBS Re 24 1:Cagayill11 PHILRICE 1994 ll 5.8 117 99 I I I PBS R.: <12 i 8a1'1wJg1 PHILRICE 1995 3.2 4.9 114 113 R I MS PBS Re 6011Hgatog.' !RR! 1997 4.5 Ill 100 I s PBS fk 62 {Nn!?-l1llian) PH!!.Rlt:E l'f<.J7 4.7 117 116 R s PBS Re 68 tS<icob1a) IRRI "1991 l4 4.4 116 116 s PBS Re 70 I Ba111ba111 :RRi 1991 12 4.5 114 116 5

PSB Rc44 1:Gohilng:J IRRI 199~ 4.1 :i./ 144 98 PSB Rc~b 1:S1111rndcll IRRI 1995 4.3 5.8 135 98

l'SBRc'18(l-faJ.,•1.111,1\·) IHRl 19')5 17 5J PSB Rc~O 1 81coll IRRI ',995 JO 43 90 PSB Rc84 1: S1pocoi) IRRI 2000 2.0 3.7 7? l'SB Rc86 (Mt11:11-0µ) 1RRJ :moo 2.1 4.J PSB Rc881N.1gal IRRI 2000 22 7.0

G2l l!PLB 1972 2.2 MS ML, YMR UPLRi5 UPLS 1980 2.7 MS s MS UPLRl7 UPLB 1981 3.0 116 MS R MR PSB Re I (Makili11.1p IRRI 1990 2.4 19 12! R I s PSB Rtl;,(Qini!iniµi~ Pul~ PHILRKE l!>!>l ··:B ·6~., i. JP.;, ,R, 1:.>·,~· L;H : <x;:;_ PSB RcS(ll.rn~·~!) IRRI 1997 2.9 4 2 122 R l s R· Res1s1ant MR-Moderately Resistant J.J11tcn11cd1ate MS-Moderately Susceptible S-Susccpt1blc BPH· Brown Pliml Hopper GLH· Green Leaf Hopper PSB-P11ilippiue Secdbo;ird ton (t)=-20 sacks, 50 kilos CilCb • Several varie1ics were rnted rcsist<nu to Tungro at the time of their release. TI1ey 1miy no longer resistant now Source: PhilRice. 2001.

72

MR r I I

l';,;;,c Ii :Y L<P I I s

n: s'··· s

;·s s s I

s MS

s I

MR MS MR :MS

l

s s

MS .I :•• S ..

' s

Stem Borer

MR

MR

''"'"·1: , ... ,.MR

I MS MS MR I

R I

MS I

R I

MR MR

j

'

Table 44. Rice deficits, by region and Philippines (Average 1993-1997)

ITEM Surplus Deficit Balance (1000 mt) (1000 mt) (1000 mt)

Philippines 1328 1692 -364

Luzon 934 1192 -249 NCR 783 CAR 25 Ilocos 108 Cagayan Valley 492 Central Luzon 343 Southern Tagalog 313 Bicol 71

Visayas 169 322 -153 Western Visayas 169 Central Visayas 218 Eastern Visayas 104

Mindanao 216 178 38 Western Mindanao 13 Northern Mindanao 21 Southern Mindanao 60 Central Mindanao 216 ARMM 63 CARA GA 21

' Source. STRI\ E Foundat1011, 1999.

73

5.4. 7. The rice subsector is globally competitive under the import substitution trade regime

~ The rice subsector is an efficient saver of foreign exchange (import substitution)

~ There is, therefore, an economic logic in pursuing a rice self-sufficiency program that can substitute for imports.

74

6.0 CONCLUSION AND RECOMMENDATIONS

6.1. Conclusion

Rice dominates Philippme agriculture and is central in the attainment of polit1cal stability through food security. There is therefore a need to reexamine the Philippme food security policy and the rice self-sufficiency program as a strategy to achieve the goal of food security.

The analysis showed that the failure of the past rice programs to attain rice self­sufficiency was not due to the absence of science and the capability of rice research institutions to generate appropriate technologies, but rather the lack of political will manifested in: the continuous underfunding of rice programs by the public sector and the inadequacy of an advocacy strategy to advance the development of the rice subsector. If these two concerns are corrected, there are strong arguments to pursue rice-self sufficiency programs as a strategy to attain food security.

6.2 Recommendations

In pursuing rice self-sufficiency programs, general and specific recommendations are proposed by this paper. They are discussed below:

6.2.1. General

6.2.1.1. The need for Paradigm Shift

There is a need to shift from the centrally driven rice development programs to "provincial based programs" which are more autonomous and participatory. The LGUs are also mandated by the Local Autonomy Act to handle the food security concerns in their respective provmces. Given the archipelagic geography of the Philippines, rice self-sufficiency-food security objectives can be pursued more dynamically at the provincial level.

75

6.2.1.2. Immediate implementation of macropolicies and sectoral reforms

The Agricultural and Fisheries Modernization Act (AFMA) of 1997 is not yet operationally implemented at least in funding support. AFMA can use the nee subsector as the modality in operationalizing its provisions.

6.2.1.3. Strategic alliances

There is a need to form strategic alliances among rice stakeholders to advocate for the development ofrice subsector. A united development stand among stakeholders can facilitate/enhance the public sector in responding more quickly to the subsector's development needs.

6.2.2 Specific: Key Result Areas (KRAs)

For more specific recommendations, the rice subsector can follow the agribusiness system approach with following key result areas (KRAs)

6.2.2.1 Input supply subsystem

~ Access to good seeds and genetic materials ~ Enhancement of input utilization and distribution ~ R&D commercialization especially biotechnology > Credit delivery systems

6.2.2.2 Production subsystem

The strategy calls for an adequate provision of infrastructures for production 'r Diversification mto nee-based farming systems 'r Research and extension Y Technology packaging and dissemination Y Quality standards and premium pricing 'Y Minimization of production losses ';.. Private sector, farmer, LGU, SCU linkages

76

6.2.2.3. Marketing and distribution subsystem

The major strategy is to attain a cost effective movement of goods and services in the rice sector.

);. Market intelligence, information and promotion > Marketing infrastructure > All weather farm to market roads > Rice "agribusiness superhighways" > Farmers organizations >- Joint ventures and strategic alliances

6.2.2.4 Processing subsystem

There is a need for increased value adding for the rice sector "r Competitive raw material cost "y R&D on processing ).- Value added processing and product diversification , Joint ventures and strategic alliances

6.2.2.5 Financing subsystem

The need for effective delivery of credit ~ Rural savings mobilization )- Access and delivery of farm credit );.. Linkages with financial systems, big corporations for contract growing }Y Financing modalities among farmers cooperative

6.2.2.6 Human resource subsystem

Mobilizing human capital for rice and agricultural development "f- Farmers' training } Entrepreneurship training , Group and cooperative management , Private sector, farmers, LGU, SCU, public sector linkages , Good program/project managers

77

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Index

A

Access, 67 AFMA, 1, 76 Agricultural and Fisheries ModemizationAct, 1, 76 Asian financial crisis, 58 Availability, 67

B

Barley, 4 Base simulation, 23

c

Calorie requirements, 4 Camarines Sur, 62 Carrying capacity, 29, 32 C-C methodology, 33 C-C models, 32 C-C index, 32 Cereals, 25 Coarse grains, 25 Competitive advantage, 42, 50 Competitiveness analysis, 42 Competitiveness, 42, 50 Consumers' surplus, 54 Consumers' incomes, 19 Consumption, 24 Com, 24, 25 Cost competitiveness, 46, 54 Crop production

82

Crop trade, 22

D

Devaluation, 61 Distribution, 2, 77 Domestic rice consumption, 29

E

Efficiency losses, 58 El Nifio, 29

F

Farmgate prices, 63 F ertilizeruse, 18

Financing, 2, 77 Food production, 4 Food security, 67

G

GATT-WTO, 42, 51, Gintong Ani, 67 Global population, 4 GPEP, 68 Green revolution, 16, 26

H

High technology, 47 Human resource, 2, 77

I

Ilocos Norte, 33, 35, 63 Iloilo,33,37, 63 Impact of globalization, 42 Import substitution, 74 Import volume, 29 Import-export trends, 29 Input supply subsystem, 2, 76 International Food Policy Research Institute, 22 Irrigated areas, 28 Irrigated rice areas, 16 Irrigated rice production, 43, 4 7, 5 0 Irrigation development, 15 Isabela, 33, 37, 63

L

La Nifia, 29 Laguna,63 LGUs, 1, 75 Local Autonomy Act, 1, 75 Low technology, 49

M

Maize,26 Makamasa Rice program, 68 Marketing, 2, 77 Medium technology, 49 Millet,4 Minimum access volume, 42

83

N

Net efficiency loss, 58 Net farm income, 33

Net importer, 29 Net imports, 24 Net profitability, 43 Non-irrigated, 53 North Cotabato, 33, 39, 63 Nueva Ecija, 33, 38, 63

0

Output prices, 61

p

Palay, 26, 27 Pangasinan, 33, 36, 63 Paradigm Shift, 1, 7 5 Partial equilibrium analysis, 5 PhilRice, 34 POET, 29 Political stability, 70 Political will, 1, 75 Population growth, 19 Population, 5 Population, organization, environment and technology, 29 Pre GATT period, 42 Price competitiveness, 46, 48 Processing, 2, 77 Producers' surplus, 55 Production subsystem, 2, 76 Production, 26, 27

Productivity growth simulations Productivity gro\vth, 17 Profitability analysis, 42 Profitability, 54, 59

R

Rainfed areas, 27, 51 Resource cost ratios, 46, 50 Rice producing provinces, 33 Rice area, 23 Rice carrying capacity, 33, 35, 36,37,38,39 Rice deficits, 73 Rice imports, 11, 12 Rice input prices, 65 Rice markets, 14 Rice producers, 9 Rice production growth rate, 19 Rice production growth, 29 Rice production, 10, 19, 23, 30 Rice programs, 68 Rice sector, 59 Rice subsector, 74 Rice supply-demand balance, 22 Rice technologies, 51 Rice trade balance, 22 Rice trends, 7, 25 Rice varieties, 72 Rice yield, 23 Rice exports, 11, 13 Rice self-sufficiency, 67 Rye,4

s

Safety nets, 69

84

Self-reliance, 67 Sorghum,4 Sources of growth, 25 South Cotabato, 39, 63 Stability, 67 Strategic alliances, 1, 76 Subsistence level, 33 Supply-demand balances, 18 Sweetpotato, 4

T

Total social benefit, 55 Trade liberalization, 54 Trade, 11

u

Upland areas, 28

w

Welfare effects, 56 Wheat, 4, 25 Wholesale prices, 63 World population, 5

y

Yam.4 Yield gap, 69

About the Author DR. LEONARDO A. GONZALES is a policy researcher and an international consulting agricultural economist. He finished his B.S. Education, cum laude at St. Mary's University; his M.S. Economics at the Asian Social Institute; and his Ph.D. in Agricultural Economics at the University of Tennessee under the Fulbright-Hays Scholarship.

He has written over 146 technical articles related to agricultural policy, feasibility studies, the economics of food and agriculture, and agribusiness development. His recent books include: Breaking New Ground: The Prospects of Enhancing the Corn Sector '.s

Global Competitiveness Through Biotechnology (2000) and Food-Carrying and Income Generating Capacities of the Rice Sector (2002).

The author was also a former Liaison Scientist for Asia and Research Fellow of the International Food Policy Research Institute (IFPRI) and Agricultural Economist of the International Rice Research Institute (IRRI).

As an agricultural policy consultant, he has worked with the Asian Development Bank; World Bank; the United Nations Food and Agriculture Orgamzation (UN-FAO); United States Agency for International Development (l.JSAID); Philippine Senate; the Department of Agriculture (DA); the Department of Science and Technology (DOST); the Philippine Council for Aquatic and Marine Resources and Development (PCAMRD); the Philippine Council for Agriculture, Natural Resources Research and D evelopmcnt (PCARRD); the Philippine Rice Research Institute (PhilRice), the Livestock Development Council (LDC); the Philippine Carabao Center (PCC); and the Ministry of Agriculture Forestry and Fisheries of the Republic ofTimor Leste.

Currently, he is a Visiting Lecturer of the Center for Food and Agribusiness, University of Asia and the Pacific (UA&P), Affiliate Faculty of the College of Economics of Management, University of the Philippines Los Banos (CEM-UPLB), and the Founding President and Chairman of the Board ofTrustees of the Society Towards Reinforcing Inherent Viability for Enrichment (STRIVE) Foundation -a non-stock, non-profit organization engaged in policy research, advocacy. and values education.

85

ABOUT NAST

The National Academy of Science and Technology (NAST) Philippines is the counh·y's highest advisory body to the government on matters related to science and technology. It also has the mandate to recognize outstanding achievements in science and technology by Filipino scientist in all fields of science.

VISION, MISSION AND MANDAIB

The National Academy of Science and Technology Philippines, founded in 197 6, continues to stand today with a firm resolve to faithfully pursue:

Its VISION:APROGRESSIVE PIDLIPPINESANCHORED ON SCIENCE

Its MISSION: 1. To recognize exemplary science and technology achievements among the young and

among peers 2. To encourage individual Academy members to continue their scholarly pursuits thereby

making the Academy the principal reservoir of scientific and technological expertise in the nation

3. To provide independent and science-based advice on problems facing the nation and the world

4. To link with like-minded institutions and individuals in promoting scientific ach1ew­ment in the Philippines and abroad

5. To promote a strong science culture in Philippine society

ItsMANDAlE: 1. To recognize outstanding achievements in science and technology as well as provide

meaningful incentives to those engaged in scientific and technological researches (PD 1003-A).

2. To advise the President and the Cabinet on matters related to science and technology (E0818).

3. To engage in projects and programs designed to recognize outstanding achievements in science and promote scientific productivity (EO 818).

4. To embark on programs traditionally expected of an academy of science (EO 818).

The National Academy of Science and Technology Philippines 2F Philippine Science Heritage Center, Department of Science and Technology Complex, Bicutan, Taguig, Metro Manila 1631, Philippines email: nast@mozcom.com; nast@dost.gov.ph; http://www.dost.gov.ph/nast