I AM indefinitely postponing the third and final part of my Big Bold Reforms for Agriculture series as it has become anticlimactic given rapidly unfolding events in the Middle East that have serious implications on our economy.
In a recent Substack podcast, Nobel economics laureate Paul Krugman cited rising fertilizer costs as a serious threat to global food supply. He was a bit apologetic about dealing with fertilizer as an issue because his fields of specialization are international trade and new economic geography.
But he pointed out that the bombing of the liquefied natural gas (LNG) processing and storage plant in Qatar would result in an unprecedented fertilizer supply shortage (particularly urea) because fertilizer is primarily derived from LNG. Unfortunately, the Persian Gulf state produces the bulk of the world’s fertilizer.
The Philippines sources a significant portion of its oil and fertilizers from the Middle East. With oil, LNG and fertilizer hit hard by the bombing campaigns by the of the US, Israel and Iran, the adverse repercussions on the world’s energy, fertilizer and other products derived from oil are enormous.
Fertilizer is critical in increasing agricultural productivity and food production. Plants, particularly palay, need a lot of urea (nitrogen). With rising fertilizer costs or a supply shortage, our food production capability could be seriously handicapped.
A cursory examination of the Fertilizer Pesticide Authority’s website shows that fertilizer prices have increased to an average of more than P1,800 per bag of urea from P1,600 more than two months ago. Note that the fertilizer being sold are still stocks accumulated during the pre-war period.
If fertilizer costs follow the trend in petrol prices, the figure might double in the coming months. In fact, there are reports that in Cagayan, fertilizer has breached the P2,000 per bag mark.
Agriculture’s fertilizer woes do not seem to end there. It should be noted that we are still at the off-peak season of fertilizer consumption. Palay planting starts in May. We are now at the tailend of the palay harvest for the dry planting season.
Come May till July, there will be a dramatic upswing in fertilizer demand because palay needs a lot of urea to be able to produce healthy grains. At least around four bags of fertilizer are needed per hectare of palay farm.
Palay needs a lot of nitrogen to properly grow. Inorganic fertilizer has around 40-percent nitrogen content while organic fertilizer has less than 5 percent. It is for this reason why a robust advocacy promoting organic fertilizer in palay production has not met much success.
It is unrealistic to collect the amount of cow or chicken dung that will serve as a substitute to approximate the level of nitrogen that inorganic fertilizer can provide. We simply do not have enough cows, carabaos, horses and chickens to produce the required volume of dung.
Vegetables, though, have a lower nitrogen requirement and hence, inorganic fertilizer will suit the crops need for healthy growth. Summer is the season where the bulk of the country’s vegetable production takes place. Vegetables also do not require much water, unlike palay.
But given the rising fertilizer cost, vegetable farming will be affected and will inevitably lead to an increase in prices. On top of the fertilizer headache is the rising cost of transporting vegetables to the market, resulting further to high prices for already hard-pressed consumers.
The food problem does not end there. With lower fertilizer application due to high costs, expect palay yields in the wet harvest season (September to early December) to decline. Yearly palay output will drop as 70 percent of our produce is harvested during the wet planting season. This forecast will become more valid if a predicted El Niño happens late this year.
Authorities will have to scramble for rice imports given that we have a rice supply gap, in a normal year, of more than three million metric tons (MT) annually. Local production cannot keep pace with local demand. But with an expected decline in harvest due to rising fertilizer cost, I will not be surprised if the country surpasses five million MT of rice imports this year.
Unluckily, we are faced with another problem in terms of sourcing. Almost 90 percent of our rice imports come from Vietnam. Last year, because of a global supply glut, the Department of Agriculture imposed a rice import ban from September to December to arrest declining palay farm gate prices.
This irked Vietnamese authorities because their farmers were just harvesting their produce and looking for markets. The DA nonchalantly ignored their pleadings to open our market by declaring that we needed to prioritize the interest of our local farmers.
Vietnam was forced to find alternative markets at a loss to its rice farmers and traders. It had to sell to African and Middle East countries. The country also came out with a plan (Decision 583) to lessen dependence on the Philippines for rice exports, reduce production for exports from eight to seven million MT this year and eventually to only four million MT of almost entirely higher-quality and more expensive grain in 2030. This means considerably less of the five-percent broken rice that the Philippines relies on for mass consumption.
In the past, four million MT of Vietnam’s rice exports was destined for the Philippines. This was slashed to only around 2.5 million MT in the new plan. This means our authorities will have to look for alternative sources for the other 2.5 million MT if the government wants to prevent a serious rice supply shortage this year.
We are not even talking about the final price, only securing a volume adequate for our consumption needs. Sooner or later, global rice prices will increase because of the rising costs of fertilizer and transport. Some exporting countries might even resort to banning exports to prioritize their food security. If that happens, which occurred in 2007-2008, expect rice prices to skyrocket.
I hate to be the agriculture sector’s Cassandra. But even if I sound alarmist, it is best to now articulate the dire prediction just to goad the government into serious action instead of continuing an “everything is fine” narrative.
fdadriano88@gmail.com
