Agriculture trade deficit widens in Q1

PHILSTAR/JOVEN CAGANDE

By Carmina Angelica V. Olano, Researcher

THE trade deficit in agriculture commodities widened in the first quarter, the Philippine Statistics Authority (PSA) said.

Data from the PSA released Friday showed outbound shipments of agricultural goods totalled $1.5 billion in the first quarter, up 0.57% year-on-year.

Meanwhile, around $3.56-billion worth of farm products were shipped into the country during the period, up 14.35% from a year earlier.

As a result, the first-quarter deficit in agriculture trade was $2.06 billion, up 26.95% from the $1.63-billion gap a year earlier.

Total agricultural trade, which is the sum of imports and exports, was valued at $5.06 billion in the first quarter, up 9.9% from $4.6 billion in the same period of 2018.

Agriculture accounted for 11.5% or $5.06 billion of total trade, which was $44.05 billion in the first quarter.

The Philippine incurred its biggest agriculture deficit with the Association of Southeast Asian Nations (ASEAN) at $1.03 billion followed by the United States ($489.81 million), Australia ($177.18 million), and the European Union ($165.25 million).

On the other hand, trade in farm goods with Japan was in surplus by $230.59 million.

Edible fruit and nuts were the country’s top agricultural export at $611.57 million, or 40.89% of the value worth of total goods shipped.

Other top farm goods exports include animal or vegetable fats and oils ($231.75 million); tobacco and manufactured tobacco substitutes ($107.09 million); preparations of meat, of fish or of crustaceans, molluscs and other aquatic invertebrates ($103.34 million); fish and crustaceans ($90.81 million); and preparations of cereals, flour, starch, or milk ($75.66 million).

Meanwhile, the country’s top imports were cereals at $969.14 million, followed by miscellaneous edible preparations ($402.31 million); residues and waste from the food industries ($393.24 million); dairy produce ($320.57 million); and meat and edible meat offal ($296.51 million).

UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion said although a trade deficit in agriculture is expected, it still implies weakness in the sector.

“Having more agriculture commodity imports than exports describe a rather weak productivity of the agriculture sector. It is not new, however, that Philippine agriculture has been a laggard contributor to general economic growth of the country,” he said in an e-mail.

Mr. Asuncion also noted that agriculture trade was driven by imports amid increasing local demand for food.

“With increasing economic growth is increasing demand for food and other agriculture products. Aside from higher demand, changes and easing in domestic policy particularly relating to agriculture commodity imports can be another reason for the growth in agriculture growth,” he said.

Michael L. Ricafort, head of Rizal Commercial Banking Corp.’s (RCBC) economics research division, had a similar assessment.

“The faster growth in the imports of agricultural products also partly reflect the increased requirements of the local economy, which remains to be among the fastest growing in ASEAN,” he said in a separate e-mail.

Mr. Ricafort also noted that the increased importation of agricultural products may be attributed to the impact of the government’s efforts to manage inflation last year.

“The wider agricultural trade deficit in the first quarter may reflect the increased importation of rice/food, fish, sugar, and other agricultural products…to increase the local supply…to lower their prices and better manage overall inflation,” he said.

Headline inflation slowed to 3.8% in the first quarter compared to 5.9% in the fourth quarter of 2018 according to PSA data. The slowdown was mostly broad-based with much of the downtrend seen in the heavily weighted food and non-alcoholic beverages index at 4.6% in the first quarter versus the 8% in the fourth quarter last year. Food alone averaged 4.1% in the first three months of the year against the 7.7% average in the preceding quarter.

Mr. Ricafort said the flat growth in the country’s agriculture exports may be attributed to the global economic slowdown largely due to ongoing trade tensions between the US and China since July of last year.

“Economic growth in China, which is the world’s second biggest economy and the biggest importer/buyer of various agricultural commodities, has been among the slowest in nearly 30 years,” he said.

TRADE SEEN PICKING UP
Both economists expect agriculture trade to pick up in the coming months.

“At the end of this year, robust growth is expected because of the policy changes in agriculture commodities importation,” UnionBank’s Mr. Asuncion said, adding that risks to this outlook “usually come from perennial weather disturbances.”

RCBC’s Mr. Ricafort had the same view: “Agricultural imports could continue to increase in the coming months in view of the full implementation of the Rice Tariffication Law, which removes the volume limits on rice imports in able to increase local supply of rice (to address any risk of shortage in the supply of cheaper rice just like what happened earlier in 2018), as well as increased imports of fish, corn, sugar and other food/agriculture items to increase local supply and lower local prices of these agricultural commodities in the local market…,” he said.

Mr. Ricafort likewise noted “improved trade and diplomatic relations” with major markets for the country’s agriculture exports, particularly in huge markets such as China, Japan, and South Korea.