Economic Update

29 Sep, 2017

The Department of Agriculture (DoA) has announced a raft of programmes planned for 2018 aimed at boosting farm productivity, though ensuring their viability will depend partly on funding allocations in the government’s proposed 2018 budget. 

Proposed budget increase falls short of expectations

According to the initial budget announcement in early August, the DoA will be allocated around P60bn ($1.2bn) in 2018, some 17% more than it was awarded the previous year yet less than a third of the amount it deems necessary.

In July President Rodrigo Duterte had initially approved the full amount the DoA had requested; however, the budget is now being discussed in parliament, with a final decision expected by the end of October.

On August 3 the minister of agriculture, Emmanuel Piñol, told local media that $1.2bn would only allow for the construction of 600 km of farm-to-market roads at an average cost of P10m ($196,000) per km, far below what is required to meet the target of 13,000 km of farm-to-market roads by 2020. He added that P50bn ($981.9m) of the proposed budget was intended for an “Easy Access to Financing” programme for farmers and fishermen.

“[To grant] at least three-fourths of [our original proposal] will be very, very good for us because we need to sustain our commitments to farmers and fishermen,” he said, adding that an acceptable compromise would be P165bn ($3.2bn).

Piñol has called on lawmakers to increase the budget for farm-to-market roads from around P6bn ($117.8m) to P20bn ($392.7m). Meanwhile the DoA has stated that if its budget remains the same in the coming years, it will be unable to address the construction backlog by 2020 and will only build 3000 km of farm-to-market roads during that period.

Expanding production to reduce reliance on imports

In late July the minister also announced plans for the whole of the Mindanao to become an onion-producing region to help curb reliance on imports. According to the DoA, the Philippines imports 94% of garlic and 70% of onions sold locally from China and India.

As high levels of importation can lead to price manipulation, the DoA hopes to avoid this by expanding production to more regions. Certain parts of the Davao region that have a dry climate and sand loam soil with high organic content are well-suited to growing onions and garlic, with some pilot projects showing that onions can yield 10 tonnes per ha.

“Agriculture should play an increasingly larger role in our economy as we increase production of new crops and look for added-value opportunities for our products,” Anthony del Rosario, Governor of Davao del Norte, told OBG. “Onion and garlic production are two key areas where we have seen public and private interest to develop the production capacity in the region.”

Innovation schemes

In August the DoA’s push to come up with innovative ways to boost food production was extended to Tagum City Prison in Davao City, via a joint programme with the Madaum Vegetables and Sweet Corn Farmers Association (MVSFA) that trains and employs inmates in vegetable production and raising livestock.

The project will see the MVSFA sell produce back to prison management to feed prisoners. Should the scheme prove successful, it will be extended across the region to include 5000 more inmates.

A second DoA initiative begun in July and targets cattle reproduction. Championed by the Dairy Confederation of the Philippines (DCP), the project will ensure regular reproduction of breeding stock through embryo transfer (implanting the embryo into the reproductive tract of female cattle), thereby gradually reducing the need for livestock imports.

The project is being led by local firm Universal Harvest and will take nine months to produce the first group of cattle, with an expected 30% success rate. Another result should be to boost local milk supply, which is projected to meet 10% of demand in future instead of the current 1%.

Beyond this, the Philippine government is aiming to increase cacao output to 100,000 tonnes per annum by 2020 – according to Euromonitor International, the local chocolate market is capable of growing by 13% to $306.3m in just four years.

Banana producers also received a boost last year when the DoA inked a deal between local growers and Japan’s Farmind Corporation that will see the firm import 20m boxes of Cavendish bananas per year. The deal is expected to bring in P5bn ($98.2m) annually and will be focused on buying from farmers in former conflict areas in the southern Philippines.

In late 2016 the government also approved an additional P2.3bn ($45.2m) budget for the National Irrigation Administration to help subsidise the DoA’s annual irrigation service fees collection.