More views on neglect of agriculture

BizLinks received quite a number of comments and reactions to the column piece, “Continuing neglect of agriculture,” published last Feb. 1. We’re giving way today to two comments, one from a retired gentleman farmer, and the other, a short one, from a regular Star online reader.

Manuel Bondad, our former investment banker turned Batangas farmer, writes about the planned rice importation by government in response to a deemed shortage from an expected drought this whole year. Here is what he says in his email:

“Agriculture is an undertaking, a second nature, and the issue of rice has a special place.

“Briefly, the fears by the NFA on weather-related woes need to be clarified. We have excessive imported rice stocks and the price quite high and the subsidy unrealistic. We are the one partly and directly subsidizing the NFA and also partly indirectly subsidizing with our tax payments. The NFA does not pay duties; it is the treasury from a tax scheme set aside by the Budget department.

“You are correct. We do not need government motherhood statements. We need action. Misleading government pronouncements must be avoided and at times conflicting at that.

Numbers game

“El Niño in my opinion is a numbers game, its impact on the country’s year 2010 rice needs is paramount and must be quantified before talks of additional rice importation is placed on the agenda.

“On Dec. 25, 2009, the Department of Agriculture (DA) [said it] feared P40 billion paddy (unmilled) rice losses of 2.36 million metric tons (MMT) from 620,000 hectares in 2010 due to the weather disturbance that is ‘expected to last till early next year,’ a position that seemed not in unison and in conformity with that of the DA Program Director for the National Rice Program.

“Mr. Frisco Malabanan, custodian of the program, on January 14, 2010 estimated year 2010 palay output of at least 17.4 MMT, a ‘record’ that could reach 18 million tons under the proposed 2010 budget bill, meaning our rice requirements are locked in. He added, ‘I don’t think production will be affected’ (by El Niño).

“Under what assumptions were the NFA 20-day old December 25, 2009 estimated Year 2010 palay losses of 2.36 MMT based, as well as those of the Program Director’s January 14, 2010 projection of 17.4 to 18.0 MMT?

More importations

“Seven days later, on January 22, 2010, the government citing a Bureau of Agricultural Statistics (BAS) report that first semester palay output would dip to 7.25 MMT from a year ago’s level of 7.38 MMT or the equivalent of only 86,000 MT of milled rice, hinted at rice imports on top of the 2.3 MMT sealed on the quarter of November-December 2009 public tenders, and timed for first semester 2010 arrivals.

“The importation excludes private sector-approved allocation of 163,000 MT and the duty free Thai rice volume of 367,000 MT or the equivalent of 800,000 MT of paddy rice or 11 percent of projected domestic output for the period at 7.25 MMT.

“What is the significance and relevance of the lower-end Year 2010 first semester BAS palay production estimates of 7.25MMT? Conservative, in that the BAS already inputted on January 22, 2010 the reduced first quarter output of 3.79 MMT from prior October 2009 estimates of 4.05 MMT for the first six months of 2010.

“Given NFA’s first semester 2010 rice importation of 2.3 MMT, the NFA’s January 2010 beginning milled rice inventory, the national per capita consumption, and the BAS revised lower first semester estimates, and setting aside the DA program director’s rosy annual forecast of 17.4 MMT to 18 MMT, the country’s June 30, 2010 ending stocks will last until the first week of Nov. 2010, coinciding with September-November 2010 wet harvest period.

“And if [we use] the more optimistic target of 17.4 MMT, a record bountiful Year 2010 is in the horizon! The conclusion of excessive imported milled rice squeezed in 14 days in my opinion is reasonable. Do we have part of the puzzle on ‘continuing neglect of agriculture’?

Softening world prices

“World prices have softened in the absence of buyers after the four NFA tenders, and improved rice production and bulging wheat stocks and incoming robust harvests in India despite the drought!

“Sky rocketing world rice prices in April-May 2008 as traders put it is being attributed to our country’s moves. The rice tenders in Nov. 4, Dec. 1, Dec. 8, and Dec. 15 for 2.276 MMT including reorders is no exception.

“The average per MT C&F basis is $648, payable after nine months. At the present exchange rate, [this amounts to] P30.50/kg excluding duties and carrying costs, but will deteriorate to P31.75 [using] a conversion rate of P49 to the US dollar.

“Given the present retail price of P25/kg, ‘the subsidy’ is P12.65 billion at current exchange rates or P5.50/kilo. But here is the catch: Because of the 9-month credit terms, the NFA or the rice exporters have factored in nine percent per annum or P2.06/kg, or on 2.3MMT, [the equivalent of] P4.735 billion, the hidden share of the consumers, as we consumers pay cash!

“Moreover, we are the world’s biggest rice importer of the lowest rice export grade, the 25-percent brokens.

“But in the Lemery, Batangas’ spanking public market, commercial rice retails at P29/kg. How come the palay buying price according to the NFA is P17.50/kg or the equivalent of P27/kg at a recovery rate of 65.0 percent excluding other charges?

“Are El Niño rice concerns excessive? Are NFA/DA discussions of additional rice importation at this point prudent?”

Campaign platform

Another reader, Jestar Joe, has this to say:

“For lack of its leaders’ vision, a nation falls. And without a clear agricultural vision, the nation’s agriculture fall leads to tribulation! Supported by facts and sound estimation, the article’s vision in its informative mood confirms a sure sign that agricultural tribulation is coming to our populous nation with nearly 100 million rice-dependent inhabitants.

“Having no concrete words to hear from the presidential aspirants, we could only pray and hope that to whomever the presidency will be handed down, may he be provided with leaders and servants gifted with godly wisdom fitted to effectively expand our agricultural sector.”

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.