The Philippines agriculture sector boosted by initiatives

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Having endured several challenging years marked by damaging typhoons, the Philippines’ agricultural industry made a spirited recovery in 2014, setting the scene for further growth this year across a host of segments.

Smallholder farmers, who are responsible for the bulk of the Philippines’ agricultural production, are set to benefit from a raft of initiatives, which are being rolled out by both the government and industry players. Take-up of weather-based index crop insurance schemes is also picking up as more products are coming to market, while national funding for improving infrastructure and food security will serve a twofold purpose of strengthening protection and boosting output.

Recovery under way

Agricultural production in the Philippines grew by 1.8% in 2014 to reach P792bn ($17.9bn), rising on the 1.1% growth and P777.8bn ($17.6bn) seen in 2013, according to data released by the Department of Agriculture (DOA).

Crops, livestock and poultry were the biggest contributors to growth during the year. The production of crops, which make up more than half of total agricultural output, expanded by 3.3% last year, driven by the high-performing palay (unmilled rice), corn and tobacco. Output in the segments grew by 2.9%, 5.3% and 14.3% respectively. Crop prices rose by 10.9% in 2014, the DOA said, with average farmgate prices increasing by 7.7% year-on-year.

Stronger performances across the sector follow several weather-related disasters which have taken their toll on agricultural production. The country was hit by Typhoons Luis and Mario in September 2014, while, in November 2013, Typhoon Haiyan – one of the worst storms ever witnessed in the Philippines – caused an estimated $110m of crop damage when it struck the Visayas region. Agricultural output rose by just 0.9% in the fourth quarter of 2013, significantly lower than the 4.8% recorded in the same period in 2014.

Stronger support

Government programmes are set to help boost growth in 2015. Agriculture Secretary Proceso Alcala announced plans in January to up the tempo of the DOA’s agriculture programmes in a bid to improve infrastructure, food security and hit rural income targets.

The DOA has already begun introducing several initiatives. The Farm Mechanisation, National Organic Agriculture and Post-Harvest Development programmes will play a key part in the Philippines’ efforts to make production less expensive, stabilise labour costs and reduce post-harvest losses.

The coming months will also see the launch of a P27.5bn ($670m) Philippine Rural Development Project (PRDP), a World Bank-supported initiative, which aims to improve rural infrastructure over a six-year period. After completing a series of commodity investment plans in 2014, PRDP stakeholders are now moving to improve transport links for smallholder farmers, with two thirds of the project’s budget allocated to infrastructure, including construction of farm-to-market roads in rural regions. A further P6.90bn ($160m) will go to improving the value chain of agri-fishery enterprises.

Shelter from the storm

To mitigate the costs of future devastating weather events, the government has been rapidly expanding its crop insurance scheme under the Department of Agriculture’s food self-sufficiency programme. Overseen by the state-owned Philippine Crop Insurance Corporation (PCIC), coverage is available to farmers of rice, corn, fisheries, livestock, high-value commercial crops, coconut and non-crop assets. Policies are funded through government subsidisies and smaller farmer contributions (which are generally 45% of total policy cost). The government is aiming to drive participating close to 25% by 2016.

Weather index-based crop insurance (WIBCI), which pays claims based on measurable parameters – including temperature and rainfall, as opposed to yield based traditional crop insurance – has witnessed a significant uptick. Negating the need for in-person claims investigations, WIBCI is proving to be an attractive option for private companies, especially in remote areas, where uptake is improving markedly. As part of one pilot project, farmers are being given the opportunity to buy policies offering coverage from their seed suppliers at the time of purchase.

Pilot projects for the WIBCI system were launched by the PCIC last year in Tuguegarao and Penablanca in Cagayan Valley and Dumangas in Iloilo, with further roll-outs expected in 2015.

Weather-index insurance products are also increasing among private players. More recently, Liberty Index Insurance signed on as reinsurer for a weather-index insurance pilot project in 2013, which was rolled out to 5,000 smallholder farms. In September 2014, PGA Somo Insurance Company announced the launch of a product, Typhoon Guard, to farmers on Mindanao Island. The initiative could set the stage for expansion of WIBCI insurance, while offering a significant new safeguard for farmers in a country where typhoons remain a very real risk.

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