THE Sars-Cov-2 virus, the strain that causes the coronavirus disease of 2019 (Covid-19), is 0.125 micron in size—so minuscule it’s invisible to the naked eye. And it packed a punch; more than enough to send shockwaves to the Philippines’s food supply chain, disrupting and exposing the system’s frailties.
This the super-tiny germ exposed after placing under lockdown the 48 million people on an area larger than Guatemala.
Trying to fend off the “invasion” of the virus was marked by supply disruptions, hindering the transport of food from farms to retail markets to dinner tables, especially during the first few weeks of an “enhanced community quarantine,” or ECQ.
The ECQ did not only impact producers but consumers as well, who have been forced to stay at home, or temporarily lost their jobs and exhausted their rainy day cash.
“Food production, particularly in the processing and transport phases, is disrupted due to the ECQ, which has closed much of the economy. The ECQ is necessary, but does have high costs, as do the shutdowns in other countries,” International Food Policy Research Institute Emeritus Fellow Mark W. Rosegrant told the BusinessMirror via e-mail.
“And most importantly, the sharp drop in employment and income reduces the ability of people to purchase food. This loss of income will be especially devastating for the poor, many of whom are already food insecure and have few or no savings to cushion the loss of income,” Rosegrant added.
No less than Agriculture Secretary William D. Dar noted that the Covid-19 pandemic and the lockdown highlighted “the vulnerabilities of our current systems, particularly distorting the food supply chain and global trade.”
Oversupply
Indeed, one of the worst hit sectors during the pandemic was the broiler industry, which had been enduring an oversupply for months prior to the ECQ.
The shutdown of the hotel, restaurant and industrial (HRI) sector, whose demands account for 30 percent of local broiler production, resulted in the diversion of supplies toward the retail markets, worsening the glut.
As of April 20, the country’s dressed chicken inventory nationwide surged to an unprecedented 71,864.86 metric tons (MT), about 35,442.73 MT of which are locally-produced. This number roughly represents 35.4 million birds.
With the glut, farm-gate prices of live broiler have plunged below cost-to-produce of P75-per-kg to as low as P40 per killogram, a situation direr than the 2017 Central Luzon bird flu outbreak.
“It’s a terrible glut,” Elias Jose M. Inciong said with a deep sigh.
Inciong, president of the United Broiler Raisers Association (Ubra), told the BusinessMirror that the high cold-storage inventory hinders the normalization of farm-gate prices as producers tend to unload dressed chicken once prices go up to maximize whatever profit is possible.
“Another concern is that government data doesn’t include the inventory of the big players,” he said.
Major quick-service restaurants and other big players were forced to sell their chicken meat products in supermarkets to ease supplies and somehow make profits. Some big industry players, on the other hand, donated live broiler to local government units (LGUs) as relief goods.
Inciong believes changes in supply would be seen this May. He added that Ubra also expects a 50-percent reduction in production “due to lesser flock-loading due to low farm-gate prices.”
Repair
Economist Pablito M. Villegas said the Covid-19 pandemic is a wake-up call to repair the “already oppressive and exploitative value chain” in the country’s farm sector.
For one, the production side has always been a traders’ market with traders dictating prices on farmers’ produce while the consumer side has been a retailers market with sellers dictating the retail prices of goods, Villegas explained.
“This is the opportunity to moderate the role of middlemen and traders corresponding to finance and commodity financing,” Villegas told the BusinessMirror.
“We have to transform this oppressive, ineffective and costly supply chain to a more shorter, less expensive, and less profit-oriented one,” he added.
He proposes that government privatize and socialize its current “Kadiwa” rolling-stores system in the future to remove government interference and make it a direct farmer-to-consumer system.
Villegas, a former United Nations’ food security and value chain consultant, recommended converting the Kadiwa into a “service-oriented system” where state-accredited service providers will link the farmers to consumers.
“You now streamline the value chain,” he said. “These service providers will provide the logistics cost from transport to storage.”
Philippine Institute for Development Studies Senior Research Fellow Roehlano M. Briones said one way to remove the multiple layers in the value chain is by having an efficient financing and information system.
Briones explained that the intermediaries have been a crucial part of the value chain, and somehow dominating it, due to their capacity to provide farmers with direct capital—in cold cash—and assured market for their produce.
“The traders are willing to swallow the risks,” he told the BusinessMirror.
“Ideally we want the farmers to step up or for farmers’ organizations to replace these traders. But they have to be able to overcome these two problems,” he added.
Go digital
This is where the use of technology and innovation would come ib, Briones said.
Financial technology (fintech) and the Internet are some of the potential game-changers in the country’s food supply chain as they can create new avenues and opportunities for both farmers and consumers, he added.
“If traditional markets are paralyzed during a crisis like this, then we can innovate through food deliveries and online deliveries,” Briones said.
He noted that fintech can facilitate the flow of capital for farmers. However, there’s a caveat as Briones said there’s a need to gain the trust of farmers. He said doing so would convince farmers to use such mechanism.
“That type of system—eCommerce—is not yet widespread among farmers. There is still a level of acceptability in payment systems that we have to achieve,” he said.
Briones said the provision of Automated Teller Machine cards to farmers, who are also 4Ps beneficiaries, is one step to introducing them to digital technology.
Agri online
The Department of Agriculture’s (DA) Kadiwa program proved to be a saving grace of farmers during the ECQ and the Covid-19 pandemic as the rolling-store system provided an assured market and profit.
Latest figures released by the DA showed that farmers earned over P122 million from the sales of almost 2,000-metric ton of farm goods under the three modalities of its Kadiwa system.
The DA said it was able to facilitate the sale of 40 MT of goods worth P30.27 million through 44 sites of its Kadiwa retail-selling mode while P73.55 million worth of 1,551-MT of farm produce were sold in 307 “Kadiwa on Wheels.”
The use of internet and available technology also allowed the DA to connect farmers to consumers through mobile phones and laptops. The DA said it was able to sell P18.31 million worth of farm produce through “Kadiwa Online,” which is currently running on three Internet sites.
In fact, the use of social media was also a key player in aiding farmers to sell their goods due to loss of market, according to the DA and people using such platform.
The likes of Sadiwa.PH, an online initiative run by Millennials, capitalized Twitter and Facebook to help strawberry farmers in La Trinidad, Benguet, to reach consumers in Metro Manila.
The lockdowns and the loss of tourists in Benguet and Baguio resulted in unsold strawberries; some farmers forced to produce strawberry jams. Despite such measure, there were still strawberries waiting for harvest.
Sadiwa.PH started an initiative to buy strawberries from farmers higher than the prevailing retail price in Benguet (which is about twice the current farm-gate price) and sell them to Manila consumers at half of the prevailing retail price in supermarkets.
Not big
Inciong said the current system of small- to medium-scale farming in the Philippines cushioned the impact of Covid-19 on the country’s food supply since there are still a lot of players involved in the production.
“What’s happening in other countries is that their food chain is so disrupted because they are dominated by conglomerates, like in the US. Mabuti mabuti pa tayo [We’re okay because] a lot of us are still small players,” he said.
Inciong said they propose that broiler farms with 10,000 heads and below capacity should be established in strategic municipalities or areas near urban locations to ensure sufficiency of supply during a crisis.
“There is a need for farming to be less corporate; less big-scale, so that we will not have great pressure on the environment and supply distribution would be more strategic,” he added.
Briones said there is still a need for a wide-scale farming operations to have economies of scale. He added that having a centralized farming system would be easier to regulate in terms of standards and during crisis.
“We should think that the US could have done better, since centralized, as easier to regulate and implementation of social distancing standards should have been quicker,” Briones told the BusinessMirror. “Perhaps they lacked in implementing these health guidelines.”
Improvements
Raul Q. Montemayor agrees, saying there is a need to decentralize the country’s farming system. Montemayor, national manager of the Federation of Free Farmers, said this could be done by investing in rural areas that have potential to grow more food and diversify food supply sources locally.
“One of the lessons learned even in the US is that the concentration in input, processing and marketing systems through large agribusiness companies is very vulnerable to shocks like Covid-19,” Montemayor told the BusinessMirror.
“We have to look into decentralizing and dispersing key processes aside from production such as seed production, input supply, processing and marketing, especially because of our transportation constraints,” he added.
Montemayor said there is also a need to further improve the country’s food safety system amid rise of health crisis like Covid-19.
Philippine Association for Meat Processors Inc. (Pampi) Vice President Jerome D. Ong also called for more investments in key areas that do not have plants or factories but have great potential consumer market, like in Visayas and Mindanao.
This allows a more diverse supply base in light of not only a health crisis but of animal disease outbreaks that tend to disrupt food trade across the islands of the country, Ong explained.
But “decentralization” is already a “given,” Cold Chain Association of the Philippines President Anthony S. Dizon said.
This, Dizon explained, is because there are still growth opportunities for businesses to invest in viable food production areas.
He proposes putting up cold storage hubs in Caraga and Negros Occidental where aqua-culture is thriving.
There is also an opportunity to provide cold storage to high-value fruit growers in the north, as blast freezing fruits like strawberry would prolong their shelf life, Dizon added.
Zero data
THE absence of an efficient data system did not help the industry to better adjust and cope with the pandemic situation since everyone is blind on the real amount of supply and potential production on the ground, Inciong said.
“Everything is gut feel now. There’s no confidence in information.
In fact, Inciong pointed out, the need for a sound and reliable data system is not a mere “proposal” but is mandated by the Agri-Fisheries Modernization Act (Afma) of 1997.
Under the law, the government must set up a system that could easily provide data on food supply, demand, price and price trends, down to the municipal level.
“The priority should be investing in data; it is a legal requirement. And as far as we are concerned the Afma has not been repealed,” Inciong said.
Navarro proposed that all Filipino farmers’ lands should be geo-tagged to determine where supplies would be coming from and to make it easier to assess current food stocks.
This, he noted, would form part of the government’s data base and allow authorities to easily preposition food supplies during crises.
“By then we will be able to know where we will get our supplies,” he said. “But we do not have that kind of data until now.”
Exchange system
Navarro emphasized that the government should consider looking into the establishment of a commodities exchange system that allows for a futures-trading of domestic farm produce.
Such system would be tied up with establishments of state-run silos where locally-bought produce would be stored.
Having such kind of system would ensure farmers earn at least enough profit to break-even despite sudden disease outbreaks or even pandemics, Navarro explained.
Navarro said government should also consider investing in other staple alternatives, such as the rice-corn blend that they have been pushing for the longest time. He explained that having such substitute ensures the country would have a more stable staple supply and won’t rely too much on the import market.
Need for review
Both Inciong and Navarro agree that the LGU Code should be reviewed in light of the disruptions made in food trade due to arbitrary rules set by local chief executives in the guise of protecting their localities from Covid-19.
Inciong proposes that the DA should have a presence at the provincial level and municipal level to easily intervene in collecting “sound and reliable” data needed for better policy-making.
Ong said the current autonomy of the LGUs has its pros and cons.
For one, dealing and coordinating with them is easier in terms of relief operations, he said. For another, the arbitrary rules, based on their own interpretation of existing guidelines, somehow hindered movement of food products.
“It created too much autonomy that led to different interpretations and implementations of the laws, creating confusion for everyone,” Ong said.
“Perhaps, the Local Government Code can operate and be implemented in its officially legislated form under normal situations. But during crisis situations, there should be an exception that they must toe the line when it comes to nationally-formulated guidelines,” he added.
Outbreak-proof
IN the short term, the government should provide small-scale farmers “social support,” through food ration and income support to help them survive the pandemic amid loss of income, considering that these farmers are net food buyers, Rosegrant said.
He added that the government should prioritize long-term investments in agriculture instead of short-term support to promote domestic production since this wouldn’t be beneficial due to lower food demand.
“Direct short-term support to promote domestic production [will unlikely] be beneficial given the fall in food demand, but as the Philippines emerges from the pandemic, longer-term investments in agriculture and rural areas would have big benefits, including expanded investment in agricultural research and development and rural roads and markets to improve farm productivity and market access for small farmers,” Rosegrant said.
Ateneo de Manila University (AdMU) economists said the Philippines could rise from this pandemic stronger if the government would implement reforms that encourage the development of an agriculture-driven economy.
Ateneo Center for Economic Research and Development (Acerd) Director Alvin P. Ang the implementation of the creation of Strategic Agriculture and Fisheries Development (SAFD) zones as mandated by Afma is the way forward to a post-Covid agriculture-driven economy.
SAFD zones are “areas identified for production, agro-processing and marketing activities to help develop and modernize, either the support of government, the agriculture and fisheries sectors in an environmentally and socio-cultural sound manner,” according to Afma. [Read more here: https://businessmirror.com.ph/2020/05/06/admu-economists-suggest-agri-driven-economy-for-phl-to-deal-with-pandemic/]
Briones said future investments should not be focused only on the production side but on the whole food chain system since the country badly lags behind in terms of having a proper distribution network.
“The entire [supply chain] should be looked into and not pour all investments in the top part of the chain,” he said. “What happens is that other elements of the chain are being neglected, such as manufacturing and distribution.”
Briones proposes that private sector investment in the food supply chain, through loans borrowed from financial institutions, could be considered as compliance with the agri-agra law to encourage faster developments and growth in the sector.
We’ll survive
THE DA is confident it is “ready” for the “new normal” of the country’s agriculture and fisheries sector.
Dar said this “new normal” would be anchored on three principles: survive, reboot and grow.
Under the “survive” principle, Dar said the DA shall continue to implement resiliency programs and projects on climate change, such as its P8.5-billion rice resiliency project that aims to hike domestic rice output during the crisis.
Other interventions under this stage include cash assistance and soft loans to farmers as well as ensuring unhampered movement of food trade and directly linking farmers to consumers.
The DA also intensified its urban agriculture and back gardening programs to increase food supplies and in particular ensure availability of food in urban areas, especially in households that are capable of growing plants.
“Secondly, we must reboot and reform our agricultural policies, and refocus our priorities to minimize the adverse effects and disruptions on agricultural production and food supply chain due to the Covid-19 pandemic,” Dar said.
“Thirdly, the agriculture and fishery sector must grow, by attracting more investments and resources, and partnering with the private sector and local government units—to increase food sufficiency levels, and at the same time modernize and industrialize the country’s agri-fishery sector,” Dar added.
Under the new normal, Dar vowed to “prioritize interventions on agri-fishery productivity and resiliency.” He added that the use of digital technology would also be “maximized” to “link producers to consumers through e-commerce and related activities.”
“Together, we will survive, reboot, and grow toward a food-secured nation,” Dar said.
Image credits: AP/Aaron Favila
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