Causes of agriculture calamity

The agriculture calamity described by Agriculture Secretary William Dar on Jan. 25 has complex causes. Effective consultation is necessary to identify the causes. Otherwise, the cure will be worse than the problem.

This happened when the Department of Agriculture (DA)asked President Duterte to impose a price ceiling of P270 to P300 a kilogram for pork, which now sells for P400.00. The cause given for the high prices was profiteering by traders and retailers. Though this is one of the causes, the main cause is lack of supply.

Since the African Swine Flu (ASF) outbreak in 2019, 5.5 million hogs have died or have been culled. Supply in Luzon fell by 70 percent. Given the law of supply and demand, the price had to increase. Profiteering is not the major cause of this.

If a price ceiling has to be imposed, it should address this problem. It should not be carelessly set in a way that harms the whole industry and the consumers. Over the radio on Jan. 25, DA officials were reported to have said that there had been consultations with hog farmers on the P270 to P300 price ceiling before it was recommended to the President. Asked if this was true, the two largest hog federations- the Pork Producers Federation of the Philippines (Propork) and the National Federation of Hog Raisers (NFHG)—said there were no such meetings. They strongly opposed the recommended price ceiling. Some pork producers said the lowest price range that could be viable, subject to consultation, was P330-360.

Here is the computation given. Using the average farm gate price of P250 a kilo (not P190 as used by DA), the P40 viajero and P40 multiple retailer margins, the ceiling should be P330 for regular and P360 for choice cuts. The viajero will object, saying the P40 margin was when there was ample supply. Today, instead of carrying 10 hogs per trip, he carries five, doubling his cost per hog. Propork and NFHG said these meetings with the hog supply chain players did not happen prior to the price ceiling recommendation.

Price ceilings are usually counterproductive. If a retailer sells even one peso above the ceiling, he is automatically penalized. Far away places have different transport costs, and therefore differences in price are valid. When I was a trade undersecretary, I introduced the concept of using a government-computed suggested retail price (SRP) as an enforcement tool against profiteers.

We then publicized this so the public would be guided when they bought the product. We paired this with the Price Tag law, so those with no price tags could immediately be apprehended. Consumers phoned in significant SRP deviations. If the retailer had no valid explanation for the difference, he would be penalized for profiteering. This had good media backup and achieved very desirable results. Unfortunately, not one has been penalized since the start of the pandemic and even since the imposition of the price freeze last November.

With price ceilings, many will not be able to sell because they have higher costs and cannot afford to lose money. Supply will suffer, losses will mount, and both producers and consumers will be disadvantaged. A more flexible SRP approach using multistakeholder consultation with price tags, strong enforcement, and media support should instead be implemented.

But the issue of low supply should be addressed. The government should listen to the private sector so it can provide the necessary support. For example, ASF testing at the ports of entry is still lacking. Instead of automatically importing and harming our producers with unfair foreign competition when there is a problem (especially when it is of the government’s own making), they should concentrate on supporting effective production.

The move to cut tariffs and render local producers uncompetitive with imports is very short sighted. As the hog industry suffers and is trying to recover, our consumers should be more patriotic, buy other products that are on oversupply, such as chicken. Some in the bureaucracy should stop undermining our DA leaders’ vision for agriculture. Since President Duterte has used political will in initiatives like restoring Boracay, he must now be personally involved so that he will be remembered for the resurgence of Philippine agriculture.

The author is Agriwatch chair, former Secretary of Presidential programs and Projects, and former undersecretary of DA and DTI. Contact is [email protected]