The political economy of rice farming

By: Fernando Fajardo September 11,2019 - 06:45 AM

Rice, along with corn, is the main staple of the Filipinos. In average, a Filipino consumes about 100 kilos of rice a year. That would be about two kilos per week.

An examination of the artifacts unearth in Cagayan Valley by Shutler implies that rice must have been produced in the Philippines since 3000 years ago. A living testimony to this is the Banawe Rice terraces. It is estimated to have been constructed more than 2000 years ago.

As the saying goes in the Philippines, the rise and fall of the Philippine president goes with the rise fall of the price of rice. This may be true until today as seen by how President Duterte did not wait long to sign the Rice Tariffication Law. Through this law, rice is now allowed to be imported freely and sold locally after payment of the 35 percent import tax to stabilize the price of rise.

The price of rice surged last year to more than P50.00 per kilo for some varieties. With the Rice Tariffication Law, however, we now find our local rice farmers complaining of the drastic drop in the farm gate price of palay, which is not commensurate to the drop in the retail price of rice.

Data from Philippine Statistics Authority (PSA) shows that as of the second week of August this year, the farm gate price of palay dropped by 20.9 percent to P17.62 per kilo from P22.28 per kilo in the same week last year. In the same period before in 2017, the farm gate price of a kilo of palay was recorded at P19.63.

Lately though, some areas in the country has reported that the farm gate price of their palay have already gone down below P10.00 per kilo or even lower to P7.00 pesos per kilo.

This compares with the PSA monitored retail price of well-milled rice which dropped only by 7.3 percent from P46.06 in the second week of August last year to P42.71 in the same week this year.

The common estimate of palay production cost is P12.00 per kilo. If this is true and the P17.62 farm gate price of palay as reported by the PSA is also true, then the gross margin per kilo that goes to the farmers is only P5.62 per kilo. How much is that in total income to the farmer per harvest season or its equivalent annually and monthly?

The answer depends on the area planted and harvested and the total number of kilos or tons of palay harvested by the farmer per cropping season.

Based on 2013 PSA Report on the Costs and Returns of Palay Production in the Philippines, about 84.59 percent of palay farmers in the country practiced two (2) croppings per year. One (1) cropping was adopted by 11 percent and three (3) croppings by 4.41 percent.

The average size of farm holdings nationwide was 1.63 hectares. The average area planted and harvested to palay corresponded to 0.85 hectare and 0.84 hectare, respectively.

On the other hand, palay production averaged 3,500 kilograms per hectare.

Assuming an average of two (2) cropping seasons per year and an average of one hectare of harvested palay per season, each palay farmer should have produced 7,000 kilos of palay annually. With the farm gate price of P17.62 per kilo of palay and P12.00 unit cost per kilo, the palay farmer should have earned a total of P19,670 per cropping season or P39,340 annually for two cropping seasons. This is equivalent only to P3,278 in average income per month of the farmer.

Is this amount sufficient?

Will this level of income move the farmer and his family out of poverty?

Nope! The poverty threshold in the country, as reported again by PSA, was P12,577 per capita for the first half of 2018 or 25,154 for the whole year. For a family of five, this poverty threshold would amount to 125,770 annually per family. This is way above the total estimated income of the palay farmer based on current farm gate price of palay and unit cost per kilo of palay.

With this predicament, it will not be long then that much of our rice fields will be converted into subdivisions, commercial centers, or industrial park at the expense of our rice self-sufficiency or food security program.

Some lucky people must be laughing on their way to the bank but they surely are not going to be the farmers.

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