M. A. P. Insights
Rolando T. Dy
In 2015, the Philippine Rice Research Institute (PhilRice) and the International Rice Research Institute (IRRI), with funding support from the Department of Agriculture (DA), released a landmark six-country study of rice production in Asia.
The study was entitled Benchmarking the Philippine Rice Economy Relative to Major Rice-Producing Countries in Asia. Comparative studies were done in sites representing irrigated and intensively cultivated areas in six countries: the Philippines, China, India, Indonesia, Thailand and Vietnam.
The selected sites have similar climatic conditions: all are irrigated with at least two crops a year. Of the six countries, three are global exporters — India, Thailand, and Vietnam. Three are large importers — China, Indonesia, and the Philippines. Below are yield and cost data for the six countries. All high-yield sites (see Table 1).
YIELD COMPARISON
The Philippines is third to last after India in high-yield season (dry season crop in the Philippines). It is 34% lower than highest yielder Vietnam (5.68 tons/ha vs. 8.56 tons/ha).
The Philippines is lowest in low-yield season (wet season in the Philippines). It is 39% lower than that of Vietnam (3.84 tons/ha vs. 6.33 tons/ha).
FARM COST COMPARISON
Yield affects unit farm costs. For the high-yield season, the Philippines recorded the third highest farm cost of P11.13 per kilogram (kg) compared to Vietnam’s P5.14/kg, Thailand’s P9.07/kg, and India’s P9.27/kg. In effect, the Philippines is highly uncompetitive with rice exporters (116% higher than Vietnam, and 23% higher than Thailand).
In the low-yield season, Philippine cost is the second highest after Indonesia. It is, however, two times that of Vietnam, and 1.6 times higher than Thailand’s.
SCENARIO ANALYSIS
Assuming same cost per hectare for the two competitor-countries, how much must the Philippine yield increase to match Vietnam and Thailand?
For the Philippines to be competitive, it has to raise yield to 12.30 tons/ha in the dry season and 7.54 tons/ha in the wet season to compete with Vietnam. Or to 6.97 tons/ha and 6.34 tons/ha, respectively, to compete with Thailand. These are tall orders. It is unrealistic for the Philippines to compete on yield alone. It must also reduce farm costs (see Table 2).
In the Philippines, Nueva Ecija is the “gold standard” when it comes to the country’s high-yield rice production. The study reports that the high cost of producing palay in Nueva Ecija is due to the high labor requirement in manual transplanting (25 man-days) and harvesting and threshing (21 man-days). Vietnam, on the other hand, which has the lowest production cost, uses direct seeding (2 man-days) and combine harvesters (2 man-days) resulting in increased productivity and higher efficiency.
This labor differential of 42 man-days translates to a cost-disadvantage for the Philippines of about P13,000/ha per season, or P2.30 to P3. 60/kg.
The study also noted higher milling efficiency in almost all rice-exporting countries leading to fewer broken grains and higher milling recovery. This is due to rice varieties that have similar grain size.
Are there solutions in the horizon for irrigated rice in the Philippines? SL Agritech, a leading hybrid seeds provider, claims this is possible.
In Nueva Ecija, hybrid users average 8.5 tons/ha in the dry season and 7 tons/ha in the wet season. The farm cost with mechanization can be reduced to P50,000/ha. This means an average farm cost of P5.88/kg and P7.14/kg, respectively, making it cost-competitive with Vietnam and Thailand in the dry season and with Thailand in the wet season (see Table 3).
The above high-yield regime is not feasible for all irrigated areas for various economic and climatic reasons. In 2015, the Philippine high-yield season was “dry season” with yield of 4.5 tons/ha as compared to the “wet season” of 4.1 tons/ha.
Assuming a medium-term target of 10% yield increase from 4.5 to 5.0 tons/ha for the dry season, and from 4.1 to 4.5 tons/ha for the wet season by 2022 and milling recovery of 65%, production would reach 5 million (M) tons of rice in the dry season; and 5M tons of rice in the wet season. Note: As a benchmark, irrigated rice yield rose by only 7.2% between 2005 and 2015.
Assuming further a 10% increase in rain-fed production, rice supply would be three million tons more by 2022. Note: As a benchmark, rain-fed rice yield rose by only 12.5% between 2005 and 2015.
Altogether, the total rice production in 2022 would be 13M tons from irrigated and rain-fed areas. This assumes no increase nor deterioration in irrigated areas.
Currently, rice demand is about 114 kg/capita. With a population of 102.7M in 2016, total demand is about 11.7M tons. Assuming a population growth of 1.5% a year, total demand would reach 12.8M tons to feed a population of about 112M in 2022.
By 2022, the Philippines will have a small surplus of 200,000 tons. However, using a buffer stock of say 60 days, the total requirement would be around 2.1M tons. Sufficiency will not be reached at those yield assumptions and per capita demand.
Since rice demand declines with higher incomes and hoping that government achieves its poverty target of 14% in 2022 from 21.6% in 2015, it is possible to achieve sufficiency at high yields and lower per capita demand of below 100 kg. The high yield assumes adequate supply of water and good irrigation efficiency. Strategically, there is a need to consider benefit-cost trade-offs of public investments in other crops for poverty reduction (see Table 4).
WHERE TO?
Rice farmers will not continue to produce rice if it is not profitable and if options are available. Many of them still plant rice even if it is not profitable for subsistence/own consumption. For others, because it is the only crop they are used to cultivating. Crop shifts are also limited by market and investment considerations. Large investors require farm areas larger than the five hectare retention limit under the agrarian reform program.
With irrigated farm holdings averaging one hectare, it will be a challenge to continue rice farming with traditional, low-yield technologies. The pathway is mechanized consolidated farming with full inputs that will bring incomes to P110,000 per family per year. This means an average yield of over 6 tons/ha per season at an average farm price of P15/kg and farm cost of P50,000/ha with two full crops per year or 200% cropping intensity. Import substitution is reachable. Exporting commodity rice is unlikely given developments in rice-exporting countries.
One suggestion is to convert rain-fed lowland areas to irrigated by providing modern technologies, like solar powered pumps and sprinkler irrigation. This assumes water availability. This is fast to install and can save 60% of water. Farmers can have two crops of hybrid rice and one crop of high value crop (Dr. Frisco Malabanan, rice expert, personal conversation). Good to check cost-benefit analysis and effectiveness of these technologies.
The Philippines has a long way to go to disseminate modern rice technology. The Department of Agriculture will need the local government units, the private sector, and state colleges and universities to spread the profitable, poverty-reducing technologies.
This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the M.A.P.
Rolando T. Dy is the Vice-Chair of the M.A.P. AgriBusiness and Countryside Development Committee, and the Executive Director of the Center for Food and AgriBusiness of the University of Asia & the Pacific.
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