LAST week's column discussed how agricultural trade policy reforms could lead to lowering agricultural and food prices. However, ultimately bringing down prices of any goods or services necessitates significantly raising supply, which in turn is a function of increasing productivity. Sadly, Philippine agriculture productivity is woefully low. Comparative studies measuring total factor productivity (TFP) among leading Southeast Asian countries reveal that the Philippines has one of the lowest. TFP is a measure of the ratio of aggregate output to aggregate inputs or, in layman's terms, how inputs were efficiently used in producing a particular output. The worrying problem is that as the years have passed, Philippine TFP has gone from bad to worse. There is a proliferation of literature analyzing why Philippine agriculture is in the doldrums. Foremost among the findings is the fragmentation of our farmlands into miniscule sizes due to protracted implementation of the agrarian reform program. A decline in productivity of around 17 percent was noted as a result of the never-ending pursuit of agrarian reform (Adamopoulos and Restuccia, 2019). Studies also indicate that the bigger the land size, the more likely that it will be more productive than small farms. The reason is commonsensical. Small farmers cannot afford to buy productivity-raising agricultural technology because of the very low income they derive from miniscule farms. Despite cost and return studies showing a hefty return on investment from palay (unmilled rice) farming of over 20 percent, the revenue derived ends up too small for the needs of the farmer and his family. Exacerbating this problem is that the highest return on investments in agriculture is realized by investing in technology. Without funds to invest in new technology and farm machinery, small farmers have little chance of dramatically raising their productivity and income. The solution is through farm clustering and consolidation so that it will be easier for the government to deliver support services to small farmers. The government does not have the resources and capability to deal with millions of individual farmers but can do so if they are organized into associations and cooperatives. Again, the sad fact is that the government has not seriously invested in organizing and mobilizing farmers. It thinks that by dangling incentives and subsidies, farmers will automatically organize themselves into associations and cooperatives. Some have but after availing of the incentives revert back to their old ways, only waiting to reactivate their organizations when the next round of dole outs is launched. A more definitive response to the land size problem is to increase the retention ceiling from the current 5 hectares for a couple tilling land to 20–25 hectares. This will allow the emergence and growth of middle-class farmers. They are far more entrepreneurial than the small farmers because they are better educated, have access to small capital, know the market better and can negotiate with banks for bigger working capital. Many of our small farmers are aging and no longer want to farm. Many of their kids also do not want to farm, which accounts for their pursuit of nonagricultural-related courses in college. It is indeed bewildering why our land policy wants to consign people to agriculture when many of our farmers and their kids no longer want to engage in farming while those who love to farm are denied from owning a farm large enough to be economically viable. A third factor to ensure higher farm productivity is to become more sensitive to the challenges of climate change. The old agronomic practices need to be changed or tweaked. Longer and hotter dry seasons might be a bane for some crops (e.g., rice) but a boon to others (tropical fruits such as mango and pineapple) if irrigation facilities are present. Better knowledge of the challenges of climate change is needed. The fourth and final factor is the need to strengthen the capability of institutions involved in agricultural development. The Department of Agriculture (DA) must recruit top-notch technical experts and scientists who can properly steer its productivity-enhancing programs based on economic viability and not political consideration. On another issue, the DA is still claiming that global rice prices remain high. This is not true. Global rice prices have gone down by $100 per metric ton. The Food and Agriculture Organization has noted that the 5-percent Vietnamese broken rice is around $550 from a high of $650. Similarly, the 25-percent Vietnamese broken rice is now around $500 from $600. The DA has explained that rice prices remain high because rice traders are exhausting old stocks for which they paid a 35-percent tariff. Why the agency has to make an excuse for cartel-like behavior instead of implementing measures to reduce rice prices for Filipino consumers is bewildering. With a lower tariff of 15 percent as provided by Executive Order 62, traders importing rice from Vietnam (where we get almost 90 percent of our rice imports) are now laughing their way to the bank. Given the 15-percent tariff and an exchange rate of P58 to a dollar, rice importers are realizing a profit of at least P10 per kilo. If the DA had encouraged more traders to import at the lower tariff rate and with global prices down, retail prices would have gone down by around P10 per kilo. But the DA has declared that rice prices will only start to fall in October — the peak palay harvest season when rice prices historically decline. Once that happens and with the entry of massive rice imports, palay prices will drastically decline. I expect the DA to then petition for an increase in the rice tariff, supposedly to protect small palay farmers. By that time, traders will have made a killing of buying local palay harvests at low prices. And when the petition for high tariff is finally approved, peak palay harvest season will be over and incoming Christmas festivities will be jacking up rice prices due to higher demand. In other words, the DA's rice price calculation is not meant to protect small palay farmers, much more than the over a hundred million Filipino consumers. It caters primarily to the interests of rice traders who are backed by highly influential lobby groups, both from the business sector and so-called farmers' organizations. fdadriano88@gmail.com Read The Rest at :