Rice sector must adapt to global competition

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The Philippine rice industry will soon bear the brunt of global competition as quantitative restrictions may no longer be extended beyond 2017, the Philippine Rice Research Institute (PhilRice) said.

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At present, Manila limits the amount of rice allowed to enter via the so-called minimum access volume (MAV) scheme to 805,000 metric tons.

The MAV sets the volume of farm produce allowed to enter the Philippines at reduced tariffs. Shipments outside the MAV are levied higher rates of 50 percent and require approval by the National Food Authority.

With the government no longer able to control the volume of imported grains once the QR is lifted, PhilRice said cheaper rice that is subject to a 35-percent tariff would compete in the local market.

“Cheap imported rice will likely be sold in the Philippines, lowering the prices of local milled rice and palay. This, in turn, will force farmers to look for ways to reduce their cost of production to retain profit,” the grains research agency said.

“If the QR were removed today and only 35 percent tariff remained as trade protection, local farmers will not be able to compete,” it added.

The Department of Agriculture, through PhilRice in collaboration with the International Rice Research Institute, conducted a cross-country study in 2013 that assessed the cost of producing palay among intensively cultivated and irrigated ecosystems in six countries: the Philippines (Nueva Ecija), China (Zhejiang), Indonesia (West Java), India (Tamil Nadu), Thailand (Suphan Buri) and Vietnam (Can Tho).

Among the importing countries (Philippines, China, and Indonesia), Nueva Ecija had the least cost of producing dry paddy (at 14 percent moisture content and at P12.34 per kilo). Zhejiang’s and West Java’s were pegged at P13.99 and P16.21, respectively.

Relative to exporting countries, however, it was still very expensive to produce in Nueva Ecija, with prices at only P8.87 per kilo in Tamil Nadu and P9.46 in Suphan Buri. It was cheapest to produce dry paddy in Can Tho at P6.50 per kilo.

“There is a wide difference in land productivity. Can Tho produces three rice corps a year while Nueva Ecija only has two; high rice yield also contributes to lower unit cost in Can Tho while high labor cost due to manual labor in Nueva Ecija also contributes to higher cost of local palay,” PhilRice said.

“The practice of direct seeding in crop establishment and the use of combine harvesters primarily, and dependence on family labor explain the lower labor cost in Can Tho. In Nueva Ecija, transplanting, which is labor-intensive, remains popular together with manual harvesting and mechanized threshing,” it noted.

PhilRice said the free use of water from state irrigation canals, greater volume of paddy output, more efficient handling and higher milling recovery were the key factors for Vietnam.

“Clearly, from farm to market, rice in Nueva Ecija is far more expensive to produce than in Can Tho,” it said.

Vietnam also in a much better position to export rice with 44 million MT of paddy for a population of 91.7 million, compared to 18.4 million MT for 98.4 million Filipinos.
Relying on world market to meet the Philippines’ rice requirement would not be feasible, PhilRice said.

“Given the country’s yearly total rice requirement of about 14.7 million MT rice, it will be impossible to rely solely on international trade to supply our rice needs,” it said.
“This means that we need to produce the bulk of the rice that we eat. We cannot count solely on imports,” it added.

PhilRice said the Philippine government could actually ban imports and declare rice self-sufficiency but this would trigger an upsurge in rice prices, long queues, and a restive constituency.

“With an ever-growing demand, rice imports are allowed to stabilize domestic rice prices. Indeed, food security is not just about producing enough supply but also ensuring its affordability to consumers,” it noted.

To make local rice more affordable, the grains agency said that stakeholders should improve competencies, stressing that increasing rice yield was central to being competitive. It also said that there are already ways that could have an immediate impact.
“This is where hybrid rice technology helps, coupled with appropriate crop management in our suitable areas. Increasing availability and reliability of irrigation water, particularly in the dry season, will also lead to improved yield,” it said.

In reducing cost, PhilRice the intensified use of labor-saving technologies such as combine harvesters and direct seeding was a step in the right direction. To alleviate rural labor displacement, jobs need to be generated outside the agriculture sector and improving the efficiency of milling and handling can also reduce the cost of processing and marketing rice.

“We must invest in state-of-the-art rice R&D to create next generation technologies that would be future sources of yield growth,” it said.

“We cannot allow the rice industry to die a natural death, but we also cannot afford to be complacent and continue to produce expensive rice. We should start our quest for rice competitiveness,” PhilRice said.

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