Expensive fuel, fertilizer eats away at PH self-sufficiency dreams

PROTECT CROPS Farmer sprays herbicide to control unwanted plants on rice field
in Barangay Bunga in the city of Tanza, province of Cavite. —RICHARD A. REYES

Budgeting for basic needs has become more difficult for families these days. Just when Filipinos thought the worst was over with the reopening of the economy, they find themselves in a tougher spot as food prices have soared alongside fuel prices. Petroleum products have a significant impact on the food sector. Any upward or downward adjustment of domestic prices at the pump can increase or decrease the cost of producing agricultural products and, therefore, food prices.

The demand for diesel, the most commonly used fuel in various sectors such as agriculture, manufacturing and transportation, is much higher in recent times compared to other petroleum products.

Data provided by the Department of Energy (DOE) to the Inquirer showed diesel demand in the first quarter was 2.8 billion liters, up 12% from 2.5 billion liters from last year. It represented 42% of the total demand for petroleum products during the period.

Gasoline demand, meanwhile, climbed 6% to 1.8 billion liters from 1.7 billion liters, grabbing a 26% share.

Kerosene, which is mainly used for cooking and lighting, decreased by 9%, from 23.86 million liters to 21.73 million liters.

The large price difference between diesel and gasoline in the past has now disappeared. Diesel, at some point this year, exceeded the retail price of gasoline at gas stations.

According to DOE data, diesel has increased by a total of 36.80 pesos per litre, gasoline by 24.30 pesos and kerosene by 31.35 pesos since the start of the year.

The implications are significant for a diesel-dependent economy like the Philippines, as higher pump prices translate into higher food costs and soaring inflation.

The Philippine Statistics Authority said inflation hit 6.1% in June, its highest level since October 2018. The main driver? Food and soft drink inflation peaked at 6%, the highest since the pork shortage issue early last year.

Adding fuel to the fire, so to speak, is soaring fertilizer prices. The COVID-19 pandemic and the disruption of production and trade, exacerbated by the Russian invasion of Ukraine, have led to a sharp increase in global fertilizer prices.

Latest figures from the Fertilizer and Pesticide Authority (FPA) showed that the cost of urea (granular), the most widely used grade of fertilizer, alone soared by more than 110% to 2,781, P20 per 50-kilo bag, down from just P1,320.72 per 50-kilo bag a year ago.

The Philippines has virtually no control over factors affecting the cost of agricultural inputs as it is a net importer of fuel and fertilizer, among many local food pricing factors.

“There is little the government can do to control these factors,” says Roehlano Briones, senior fellow at the public think tank Philippine Institute for Development Studies.

These challenges, along with others threatening the country’s food supply, will be the litmus test for the Marcos government in achieving the goal of making food affordable for all Filipinos.

Marcos on his guard

The president himself has undertaken the arduous task of resolving the food crisis to ensure sufficient supplies for the rest of the year, his administration’s highest priority.

“We have to deal with the impending food crisis which, it seems, will visit us in the next two quarters. When we look around the world, everyone is preparing for it,” says Marcos, who will temporarily act as the country’s agriculture chief.

Mr. Marcos’ first order of business for the Department of Agriculture (DA) is to increase production of rice, corn, pork and chicken instead of resorting to imports, a policy adopted by his predecessor mainly to fill the supply gap and stabilize prices.

“We are already at a disadvantage in terms of food supply. We really should be very careful about what we can do. I think the conclusion we’ve come to here is that we need to increase production,” he adds.

The country ranks 64th out of 113 countries in terms of implementing the four dimensions of food security (affordability, availability, quality and safety, and natural resources and resilience), according to the 2021 Global Food Security Index of the Economist Intelligence Unit.

Global agricultural production over the next decade is expected to increase by 1.1% per year, with “additional production expected to be produced primarily in middle- and low-income countries”, according to a report by the United Nations. for food and agriculture (FAO). and the Organization for Economic Co-operation and Development (OECD).

According to the OECD-FAO Agricultural Outlook 2022-2031, “key drivers” of agricultural development include greater access to inputs and greater investment in technology, infrastructure and training, which improve productivity. .

No relief in sight yet

“However, a prolonged increase in the prices of energy and agricultural inputs (e.g. fertilizers) will increase production costs and could limit productivity and production growth in the years to come,” he said. -he.

Locally, the DA predicts that the yield of palay (unhusked rice) in the first half may have decreased by 6.8%, a reduction from 1.1 million metric tons (MT) to 1.3 million MT. The country’s palay production could fall below the 2020 level of 19.29 million MT if the government does not halt the decline in production through additional subsidies, the DA adds.

The OECD-FAO also expects the current rise in agricultural commodity prices to be temporary. Still, commodity prices are expected to “resume their long-term downward trend thereafter.”

After pointing to the widening gap between farm gate and retail food prices, some farm groups have urged the Marcos administration to finally step in and check the dictates of middlemen as much as possible. The farm gate price is the selling price for a particular agricultural product agreed upon by a producer and a trader, with the latter generally obtaining the most price advantage.

The farm gate price of bangus currently ranges from 110 to 115 pesos per kilogram, but in Metro Manila it sells for around 180 pesos per kg, DA price monitoring showed.

The farm gate price for pigs is 200 pula per kg. For comparison, pork ham (kasim) is sold in the metro at 330 pesos per kg and pork lempo at 380 pesos per kg.

Meanwhile, the price of rice on the farm in April was 17.23 pesos per kg. Based on the same tracking, a kilo of rice sells for between P37.50 and P51.

The new government envisions food self-sufficiency for the Philippines, moving away from the import policy of its predecessor. Briones, however, says only a few countries have achieved this goal.

“Far from it. Very few countries have achieved 100% food self-sufficiency. Even the United States, Europe and China import some of their food,” adds Briones. INQ

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