THAILAND has been held up as a model for the government’s new domestic-demand focus for agriculture, with its competitive tourist industry helping boost local consumption and lessening dependence on exports, where prices are volatile and delivery requirements are demanding, the head of a university agriculture department said.

University of Asia and the Pacific Center for Food and Agribusiness Executive Director Rolando T. Dy told BusinessWorld in a text message on Friday that the Philippines has to tackle a number of other issues to develop the agriculture sector, among them a mismatch between export policy and the needs of a domestic market.

“The basic problem is [the] supply of competitive raw materials and cost of doing business. Our agriculture is not only less productive, it is also less diversified compared to Thailand, Indonesia and Vietnam,” he added.

While the departments of Trade and Industry and Agriculture have targeted the development of high-value crops, data from the Philippine Statistics Authority showed that the top agricultural export is still coconut oil, which is derived from a low-value crop.

The road map for agribusiness covers the development of bananas, cacao, carrageenan, coconut, coffee, mangoes, palm oil, rubber, and other processed goods such as fruits, meat and shrimp.

The second phase of the road map, which covers 2018 to 2021, is seeking to strengthen the supply chain, commodity clusters and the link between production and manufacturing.

By 2025, the government is expecting to deepen the country’s participation in the global value chain.

Despite enjoying tariff perks for selected fruit exports bound for the European Union and other countries expressing interest in sourcing agricultural products, the Philippines itself needs to import items like palm oil and large garlic bulbs to satisfy domestic demand.

Mr. Dy said that the strategy the government must ensure that “domestic production should be cost, quality and scale competitive” in order to succeed in substitution for imports.

“Coffee and cacao have import-substitution and export markets. The country imports coffee and cacao paste. But we export quality artisan chocolates from Davao. We can export barako coffee but the country is short [on] supply,” he added.

On Feb. 14, Agriculture Undersecretary for policy and planning Segfredo R. Serrano said that the department has been given a directive to focus more on local demand instead of exports as the country continues to achieve food security.

Mr. Serrano also pointed to Thailand as an example to follow, because tourists consume much of its agricultural output.

“The Thais have been doing that for a long time. They’re set on that because they know that the export market is very volatile,” he added.

“If the product that you export is fresh produce, then it’s [more] volatile.” — Anna Gabriela A. Mogato

DEERE & CO., the world’s largest farm machine maker, raised its full-year sales forecast, and there’s reason to believe that good news will keep coming.

After a prolonged slump for crop prices that slashed farmer income, fundamentals are starting to rebound, according to Farha Aslam, an analyst at Stephens, Inc. There’s a chorus echoing that view. Bunge Ltd. Chief Executive Officer Soren Schroder said this week that there are early signs of a recovery for the markets. An index measuring sentiment in rural agricultural communities rose to the highest since 2014 in February, while a Federal Reserve Bank of Kansas City report showed farmland prices are starting to stabilize.

Green shoots for the farm economy can only help Deere, which is already on an upswing as corporate farmers begin to replace older equipment. Cuts to inventory and output during the downturn are now adding to the company’s positive outlook as it produces more of its iconic green-and-yellow machines to meet demand.

A turnaround in the farm economy “would kick-start demand to an even greater extent,” said Matt Arnold, an analyst with Edward Jones & Co. in St. Louis. Sentiment in agriculture “can change on a dime. A weather event could prompt an upswing in grain prices and income, and it’s been a long time since we’ve seen one of those.”

Deere said Friday in a statement that equipment sales are projected to increase by about 29% in the financial year that lasts through October, and by as much as 40% in its fiscal second quarter.

It also said net revenues will increase by about 25% in fiscal 2018, up from a prior view of about 22%. It forecast full-year net income, excluding the impact of tax-related adjustments, of $2.85 billion. That exceeds the average estimate of 18 analysts surveyed by Bloomberg for $2.7 billion.

The company reported a surprise first-quarter loss of $535 million, which included the write-down of net deferred tax assets following US taxation reform.

“Although net income for the quarter and full year are being affected by the upfront costs of US tax reform legislation, we believe the changes will reduce the company’s overall tax rate and be beneficial in the future,” said Deere CEO Sam Allen said in the statement.

Outside of agriculture, Deere expanded its construction equipment unit last year with the acquisition of Wirtgen Group, a roadbuilding company, amid a global boom in building. Deere’s construction and forestry segment saw a 57% increase in sales in first quarter.

“The construction business is low-margin for Deere, so wasn’t meaningful to earnings in the past,” said Karen Ubelhart, an analyst for Bloomberg Intelligence. “But now it is,” given the Wirtgen acquisition.

Deere shares were 0.4% lower at $166.07 at 9:54 a.m. in New York.

Worldwide sales of agriculture equipment are forecast to increase by about 15% for the 2018 fiscal year. Industry-wide, agricultural equipment sales in the US and Canada will rise 10%, and gain about 5% in the European Union due to improving conditions in the dairy and livestock sectors. South American sales of tractors and combines across the industry will increase as much as 5%, driven by Argentina. Deere’s financial services arm is expected to bring in net income of $840 million for the year, of which $320 million is attributable to changes brought on by tax reform. — Bloomberg

THE Iloilo provincial government’s P10-million cacao and coffee planting project, scheduled for launch by the end of February, might be moved to a later date due to projections of dry weather.

Provincial Agriculture Office head Ildefonso T. Toledo said the delivery of the planting materials is almost complete, with the winning bidder coming from Batangas.

“These are grafted and ready for planting. After three years, they can yield fruit,” he said.

Mr. Toledo said more than 9,000 cacao and 8,800 coffee seedlings were scheduled to be distributed to farmers this week, but a review of the weather forecast has been ordered by Governor Arthur D. Defensor, Sr.

Mr. Defensor told agriculture officials: “You should check the projection of PAGASA (Philippine Atmospheric, Geophysical and Astronomical Services Administration) in case summer is extended.”

The governor has also recommended delaying the ceremonial planting and launch in a five-hectare area in Calinog town set for Feb. 28.

“If you distribute them now, the farmers might plant them immediately so the mortality rate will be high. Let us delay it and start planting sometime in May where the survival rate is high,” Mr. Defensor said.

The Iloilo provincial government is positioning the province as a major high-value product grower and supplier as its many upland areas are thought to be suitable for cacao and coffee. — Louine Hope U. Conserva