Table of Contents Hide
- Beneficiary of RCEP
- Usual share
- Sector modernization
- Insignificant share
- Not copacetic
- Expenses rising
- Slips, errors
- Slow implementation
- Planned distribution
- Approved budget
- Program requirement
- Earlier programs
- Reporting, reprimand
- Opting for voucher
- Feeding more
- Ten years
- Hatching plans
- Establishing facilities
- Yielding more
- Removing traders
HE stood an arm’s length outside his antebellum home in Gerona, Tarlac, as he did for the past two decades. But Samson Velaco’s patience grew thicker today: a dream would become reality in a few ticks of the Casio wristwatch on his left hand.
A dream that arrived on a truck whose tires crushed the dandelions and weeds when it entered Velasco’s front gate. His face lit up as workmen unlatched the truck’s side doors and the word “Yanmar,” embossed in white over red paint, embraced his vision.
The “sleigh” brought a gift that Velasco longed for for 20 years: a combine rice harvester.
“Panay po ang request namin, taon-taon po, ng mga machineries sa Office of Provincial Agriculturist pero hindi po kami pinalad noon, ngayong taon lang po na ito kami sinuwerte,” Velasco, a second-generation rice farmer, told the BusinessMirror.[We persistently requested machinery from the Office of the Provincial Agriculturist, every year, but to no avail. This year, we were fortunate.]
Tthe year 2019 was fortuitous for farmers like Velasco. It was last year when the Philippines decided to deregulate its rice industry and offered farmers a comprehensive farm support. In June in the middle of a pandemic—Velaso’s hope became a reality: P5 million worth of farm machinery granted to their cooperative.
Beneficiary of RCEP
VELASCO’s cooperative, the Climate Resilient Farmers of Sembrano, is one of the thousands of farmer cooperatives and associations (FCAs) that are benefitting from government’s rice competitiveness enhancement program (RCEP).
Velasco, the co-op’s current president, told the BusinessMirror their organization was endorsed by the municipal agriculturists office for being one of the most active groups in their area. Velasco’s cooperative was the lone RCEP beneficiary in their municipality.
“Sa wakas nagbunga rin po ang mga paghihirap namin,” he said. [Finally, our hard work paid off.]
Qualified FCAs and local government units (LGUs) may be given free machinery by the government under its six-year P10-billion annual RCEP fund (RCEF).
The RCEP is funded by the rice competitiveness enhancement fund that was created by the rice trade liberalization (RTL) law, which was enacted in March 2019 and deregulated the country’s rice industry.
UNDER the law, half of the annual RCEF will be spent for free machinery while P3 billion would be used for provision of high-quality inbred rice seeds. The remaining P2 billion would be divided into extension services and easy access credit facilities.
The mechanization component of the RCEF is being spearheaded and implemented by the Philippine Center for Postharvest Development and Mechanization (PhilMech), an attached agency of the Department of Agriculture (DA).
The earmarking of an annual P5 billion fund for rice mechanization is a big leap from the usual “small” share of funds for farm distribution in the government’s annual rice program, which is at least P7 billion.
The insignificant allocation for farm machinery distribution in the past has been identified among the culprits for the sector’s low mechanization level and adoption of machinery by farmers.
INDUSTRY players and experts have noted the machinery distribution tack is perhaps one of if not the most aggressive and comprehensive rice mechanization program the government is pursuing.
And it is rightfully so, in order to modernize rice production in the country, if Agriculture Secretary William D. Dar were to be asked.
Upon assuming his post in August 2019, Dar emphasized that mechanization is key in paving the way for the agriculture sector’s modernization and industrialization.
Modernization and industrialization are two of the eight paradigms of Dar’s second term in office to “level up” Philippine agriculture. Dar first served as agriculture chief for a year in 1998 during the Estrada administration.
Based on latest government estimates, the country’s average farm mechanization level is at 1.23 horsepower per hectare (hp/ha). This figure appears pitiful compared to Japan’s 7 hp/ha, South Korea’s 4.11 hp/ha and China’s 4.10 hp/ha. For rice mechanization alone, the country’s average is at 2.31 hp/ha.
“We will continue to boost farm mechanization to reduce production costs, enable our rice farmers produce more harvests, earn bigger incomes, and subsequently compete with their counterparts in Asean [Association of Southeast Asian Nations],” Dar said.
“We have to mechanize Philippine agriculture to at least four horsepower (hp) per hectare (ha), and be on a par with our Asean counterparts,” he added.
BASED on interviews with industry players and government officials, the government’s nationwide farm mechanization drive started in early 2011.
However, the share of funds for farm distribution in the government’s annual rice program, which is at least P7 billion, is not that significant.
The fund for free farm machinery did not increase so much as well over the years due to fragmented and small land-holding situation of rice farmers, which may defeat the purpose of the program to achieve economies of scale.
PhilMech Applied Communications Division Chief Aldrin E. Badua told the BusinessMirror that the cost of a four-wheel tractor is about P1 million, which is not advisable for small-scale farming.
“So they are better off with hand tractors, [the price of] which ranges from P60,000 to P120,000,” Badua, an engineer, added.
Federation of Free Farmers (FFF) National Manager Raul Q. Montemayor explained to the BusinessMirror that budget constraints and programming were also culprits of slow mechanization in the country despite existing laws promoting modernization and industrialization of farms.
“The laws are all principles. It did not have the required implementation,” Montemayor, a long-time farmer-leader, told this newspaper. “The profile of interventions of the DA did not change much in the past decade. It’s one and the same with its annual Tier-1 and Tier-2 funds.”
A HIGHER mechanization level would mean that more farmers have adopted the use of machines that experts pointed out could lead to more efficient farming resulting in higher yield and reduced production cost.
The Philippines has a low-adoption rate for 4-wheel tractors, mechanical transplanters and combine harvesters. Government documents obtained by the BusinessMirror showed this means planting and harvesting remains manually performed.
The same is observed in terms of drying at the farmers’ level since the majority of farmers still opt to dry rice on the roadside, baking over hand-woven mats under the sun.
However, the adoption rate in the use of axial threshers and 2-wheel tractors and/or hand tractors is high, indicating prevalence of small machineries nationwide.
Due to the low machine-adoption rate, Filipino farmers are spending P4.53 per kilogram (kg) for farm labor or about 36 percent of their total average cost of P12.41 per kg (2016 benchmark).
This is more than triple the P1.30 per kg and P1.02 per kg that farmers in Thailand and Vietnam spend for farm labor, respectively.
A 2016 analysis made by government experts showed that the Philippines is one of the most labor-intensive rice-producing countries at man-day per hectare basis, which refers to the amount of labor days spent.
WITH the rising labor costs over the years brought about by better work opportunities for farm workers, it has become more necessary to use machines in farming practices.
Latest Philippine Statistics Authority (PSA) data showed that the average cost of Filipino farmers to produce a kilogram of palay in 2019 decreased to P11.63 per kg compared to the P12.32 per kg recorded in 2018.
Lowest overall costs were observed due to the reduction in the expenditure of farmers for seeds, which pundits attribute to the free seeds distributed under the RCEP last year.
However, the latest figures also showed that labor costs continue to increase. In hired labor cash costs alone, farmers spent an average of P10,289 per hectare last year compared to P9,826 per hectare in 2018.
The DA hopes the 6-year RCEP would reduce the country’s average rice production cost to about P8 per kilogram, with each component contributing a peso reduction.
Government documents obtained by the BusinessMirror show RCEP’s farm mechanization component program could reduce production cost of farmer-beneficiaries by P2/kg to P3/kg while cutting their post-harvest losses by 3 percent to 5 percent.
The documents also showed the government eyes to increase the profit margin for rice farmer beneficiaries under RCEP by 5 percent starting 2021, with 85 percent of machinery/facility users having greater income at P2,000/ha. to P3,000/ha. compared to non-users.
LIKE new laws enacted or programs implemented, the RCEP was not spared so-called birth pains.
Before the RTL law was passed, industry groups had expressed apprehensions over PhilMech’s lack of capacity and manpower to absorb a P5-billion annual fund, conduct a series of procurements and distribute thousands of machines. Some critics point to PhilMech as only an extension and research agency.
The critics were proven right.
The PhilMech faced setbacks and challenges in conducting biddings for the machines, delaying interventions for qualified and identified beneficiaries.
Timing is crucial in distributing farm machinery since farmers follow a strict cropping calendar. If a transplanter or tractor arrives after farmers have planted their rice seeds, then they would only be able to use these machines after three months to six months.
Persons familiar with the process that PhilMech has undertaken told the BusinessMirror that government officials went back and forth in finalizing rules and guidelines over RCEP’s mechanization component to prevent the mistakes of the past from happening again.
One of these is the inclusion of a global positioning system unit in machines to be procured and distributed to help the government to monitor and evaluate the status of the machinery.
A 72-page DA paper reviewing the RTL law 18 months after it was enacted explained that the RCEP mechanization component was delayed “due to the complicated and cumbersome procurement process as well as the need to address failures in the past on the provision of public funds for machinery.”
Badua said the program was delayed since the fund was only given to them in the latter part of the third quarter in 2020. He explained that PhilMech cannot conduct any activities related to the RCEP mechanization component until the funds are with them.
Using budgets appropriated for other activities could get them flagged by government auditors.
Upon receiving the funds, PhilMech still had to identify and validate the initial beneficiaries of the program to ensure they comply with the guidelines set by the government — a minimum 50 hectares of cumulative land, at least 100 hectares of nearby serviceable areas, shed or place to keep the machines properly and willingness to be trained.
The P5-billion fund for the RCEP mechanization component in 2019 was carried over to 2020 with initial distribution of machines only happening in June despite promises they would be completed as early as the first quarter.
THE DA paper obtained by the BusinessMirror showed that from January to July, the PhilMech only utilized P1.6 billion of the P5-billion 2019 funds.
Separate data provided by the PhilMech to this newspaper showed that as of December 6, the agency has only been able to deliver only a fourth about 2,077 farm machinery of the 7,912 target units for the 2019 fund.
As for the 2020 funds, the agency only delivered 308 units, which is 3.85 percent of the 7,996 units it aimed to distribute for the second year of the program.
Based on documents provided by PhilMech, 1,694 FCAs and LGUs were included in the final list of beneficiaries for the 2019 fund; and 2,081 FCAs and LGUs beneficiaries for the 2020 fund. The FCAs and LGUs are from 947 municipalities in 57 rice-producing provinces.
PHILMECH told the BusinessMirror that P6.1 billion out of the P10 billion combined 2019 to 2020 funds have been awarded and obligated. The BusinessMirror was also told that P2 billion are ready for award and undergoing processes for notice of awards, contracts and notice to proceed to winning bidders.
The agency added that about P1.9 billion of its accumulated savings from the completed biddings are scheduled for new procurements.
Badua explained that the deliveries for the 2019-funded and 2020-funded machines were extended due to logistical concerns and bottlenecks caused by the Covid-19 pandemic, such as lockdowns in countries like China where the equipment is being imported.
Failed biddings were also a factor since the timeline for the distribution was moved later due to rebidding, he said.
A bidding usually takes about 120 days to be completed, including the deliveries of the machines to the beneficiaries.
Badua, who is also part of PhilMech’s bids and awards committee, said they divided the bidding into lots specific to provinces, regions or island regions as farmers in each area have varying machine specifications.
He cited some reasons for failed bidding: lower approved budget for contract than the market price being claimed by bidders and suppliers, as well as lack of distributors in certain regions like in Visayas and Mindanao.
SINCE the program requires specific types of machines to cater to the needs of the FCA and LGU beneficiaries, there are times that there are only one or two suppliers of the equipment and worse they have limited logistical capacity.
Due to this, suppliers are forced to enter into joint ventures e.g., Luzon suppliers partnering with Mindanao distributors, to be able to win contracts and for the program to move forward.
Nonetheless, Badua assured the beneficiaries of the program that the remaining units pending under the 2019 funds would be distributed before 2020 ended while delivery of the 2020-funded machines would be completed by the first quarter of 2021.
And if there would not be any more logistical concerns due to Covid-19, the implementation of the 2021 RCEP mechanization fund would be completed within the year, Badua added.
“We already have the recipients for 2021 and we have validated them,” he told the BusinessMirror. “But we cannot start bidding for the machines since we do not have the fund yet.”
MONTEMAYOR said earlier farm mechanization programs of the government had a bad reputation because there was no sound monitoring and evaluation system to ensure that the machines are being used properly.
He explained that some of the machines that were distributed are now idle, with some being sold by farmers due to lack of proper policy-support for farmer-beneficiaries.
However, Montemayor said PhilMech’s current farm distribution system of giving first the immediate machine requirement of a FCA is good to ensure that they will really utilize the equipment.
It also serves an incentive for the FCA-beneficiaries to perform well in order to be given the remaining set or necessary machines to fully mechanize their farming practice.
“It’s good they are not providing the complete set of farm machinery from planting to drying in one distribution to be able to determine first the performance of the beneficiaries,” he said.
Badua said they have put in place a monitoring and evaluation system to ensure that the mistakes of the past would not be repeated, and the goals of the programs would be achieved.
Badua said they conduct monthly assessment and mid-year review of the performances of all the FCA and LGU beneficiaries to determine how the machines improved their productivity, such as reduction in production cost, higher yield, and additional profit.
BADUA pointed out that they are strict in monitoring the management of the machines. He noted that the memorandum of agreement (MOA) between the beneficiaries and PhilMech gives the FCAs and LGUs the duty to take care of machines and see to it their members are benefitting from the equipment.
For one, under the MOA, farmers belonging to FCA and LGU beneficiaries should enjoy lower service fees with everyone having access to the services of the machines. Badua said they are also monitoring if there are unscrupulous beneficiaries who would just sell the machines.
He said they required the beneficiaries to submit reports every six months while PhilMech conducts on-the-spot inspection to see the status of the machines on the ground.
If the program beneficiaries cannot show satisfactory performance in the use of machines and compliance with the MOA, then the PhilMech has the right to reprimand them and eventually confiscate the machines.
The confiscated machines would then be redistributed to more deserving applicants/beneficiaries. The agency receives about 6,000 applications to be beneficiaries of the program.
On the other hand, beneficiaries with “exemplary performance” would be able to request new machinery again from the PhilMech to complete the set or package of equipment that they need to mechanize their whole production process from planting to milling, Badua added.
Opting for voucher
MONTEMAYOR proposed that PhilMech explore implementing a voucher system instead for its farm distribution program in order to ensure that the equipment is the “farmers’ choice.”
In his proposal, Montemayor explained that FCA and LGU beneficiaries will be given a voucher worth at least P1 million that they can exchange for farm equipment of their choice in government-accredited manufacturers or sellers.
Through this system, it is guaranteed that FCAs and LGUs would get the farm machinery that is compatible in their area and receive their preferred after-sales service.
He explained that farmers’ preference for farm machinery varies from one area to another, especially with the aftersales service that is convenient to them.
He said this system could be done through a QR code to make it automated and easier to monitor the transactions.
This system, he added, may also curtail “palakasan” (currying favor) in government procurements and biddings and may even improve market competition among farm machinery sellers to be able to earn more profit from beneficiaries of the program.
“It’s like Shoppee or Lazada. You have a P10,000 credit for example and you have your choice on which type of farm equipment you are going to use it,” Montemayor said.
MECHANIZING the country’s rice farmers would also mean lower wastage at the production level, hence, increasing domestic supply of rice.
At present, about 16.47 percent of total palay output are annually lost at the post-harvest level. This is composed of losses in harvesting at 2.03 percent; piling, 0.08 percent; threshing, 2.18 percent; drying, 5.86 percent; milling, 5.52 percent; and storage, 0.8 percent.
Based on BusinessMirror’s computations, the country loses at least 3 million metric tons of palay annually due to post-harvest losses, which could feed about 19 million Filipinos already.
The country’s post-harvest losses have been declining since the 1970s as more Filipinos gained access to farm equipment, especially in the advent of the Green Revolution where small-scale machinery was distributed to farmers.
“If the RCEP program would be implemented properly and would succeed, there would be huge reduction in the post-harvest losses of farmers,” Carlito B. Balingbing of the International Rice Research Institute (IRRI) told the BusinessMirror.
The government’s target of reducing post-harvest losses by 2 percent to 3 percent would mean an additional output for farmers of about 80 kilograms to 120 kilograms from the current average of 4,000 kilograms per hectare. This could easily translate to an additional income of P1,280 per hectare to P1,920 per hectare at a P16 per kilogram average palay price.
PHILMECH Executive Director Baldwin G. Jallorina Jr. said one of the goals of their agency at the end of the RCEP program is to be able to locally fabricate all imported rice farm machinery.
Under the RTL law, procurement of the required machinery should give priority to local manufacturers to help the domestic industry over imported ones.
Jallorina said there are certain farm equipment and machinery, such as 4-wheel tractors and some combined rice harvesters, that remain unavailable locally. This, hence, requires importation.
However, Jallorina pointed out that only 28 percent of all the farm machineries being distributed by PhilMech are imported with the bulk of the volume being manufactured locally.
PhilMech, which has a core mandate of research and development of the country’s agriculture postharvest system, has been successful in fabricating farm machinery from abroad.
“In our mechanization program, one of our objectives at the end of six years is to be able to localize all imported machinery This is the research and development that we are doing,” he said in a news briefing in late October.
“We are capable of localizing these farm machineries,” he added. “We are hoping to fabricate them all.”
Badua said locally fabricating the imported machinery would help boost the local manufacturing sector, provide employment to Filipinos, and generate additional income for the government due to taxes paid for imported materials.
However, Balingbing, IRRI Senior Associate Scientist for Mechanization and Postharvest, said fabricating locally the imported farm machinery may take more than five years since the country lacks major parts needed to manufacture them. Furthermore, these equipment, like the four-wheel tractors, have complicated parts.
“In the experience of IRRI, it took a minimum of 10 years in fabricating small machinery from research to farmers’ adoption,” he said.
THE DA analysis paper recommended that the government undertake a farm clustering program parallel with the ongoing implementation of the RCEP program to be able to maximize its potential and benefits.
The paper added that consolidating farms would also make them more viable for the adoption and use of modern and climate-resilient technologies like precision agriculture techniques, laser-leveling, drone applications, among others.
“This is reasonable considering that the share of labor costs is a third of total palay production and this share of labor expenses continues to rise,” the paper read.
“To ensure the efficient use of agriculture machinery, farmers in productive rice areas will need to be organized in clusters or blocks that are optimal for employment of agriculture machinery and other modern (i.e., precision agricultural techniques) and climate-resilient techniques like laser leveling, drone applications and customized water saving,” it added.
The government could also explore “contractual schemes” (e.g., labor pooling contract arrangements) in farm labor, such as the one employed in Vietnam.
THE DA analysis paper added that “integral to the clustering approach will be the use of collective labor contractual arrangements.”
It read: “Within these rice farming clusters or blocks, key collection centers, drying facilities and warehouses should be established or identified, where these exist; these should help farmers schedule the sale of their produce and prevent drastic drop in their farm gate prices.”
This type of program should be “complemented with financing arrangements like warehouse receipts and forward marketing contracts. At least 10 clusters (start with those adjacent to major urban centers in Metro Manila, Metro Cebu, and Metro Davao) should be up and running before the end of the Duterte administration,” according to the paper.
Balingbing also proposed that the government consider providing hermetic storages to farmers so they can properly store and maintain their seeds and rice’s quality.
He noted that there currently available hermetic storage in the market that is not costly and uses green technology. He explained these products are available for small-scale and commercial uses.
The use of these types of storages would also help farmers to combat climate change and save their seeds or produce during typhoons, Balingbing added.
THE distribution of large-scale farm machinery to FCAs would also help them transform into entrepreneurs since they can now become service providers to farmers who need access to farm machinery.
Take the case of Velasco’s cooperative. Velasco and his members used to tap a private service provider for tractors and combined harvesters.
They used to pay P3,500/ha. to private service providers but now they only pay P2,800/ha. to their cooperative for the service of four-wheel tractor.
Furthermore, co-op members can pay the service fee after harvest or when they have money already to pay. They only need to provide diesel or shoulder the cost of the diesel to avail the services and pay the remainder of the fee afterwards, Velasco said.
And since they got machinery of their own now, they now offer services to nearby barangays at the same market price of P3,500/ha.
VELASCO said they have earned an additional P50,000 at least from the service fees they earn from their four-wheel tractor services. They use this to cover the costs to maintain and operate the combine harvester.
In turn, the fees collected from the service charges of using the combine harvester have provided their cooperative with an additional profit of P150,000.
Velasco said the machinery also increased their yield by about 15 cavans per hectare, which spells additional profit of about P12,750 per hectare.
Velasco hopes to get another set of farm machinery this year. This time, dryers and millers to mechanize their whole production process.
If they are given the said machines, they will now be able to sell directly rice to consumers within their vicinity. This, Velasco said, would provide them higher income as it would remove the presence of traders in the value chain.
He said if these “gifts” would come on another “sleigh,” the lives of farmers in this town more than a hundred miles of the capital, would be better.
Image credits: Anton Medvedev | Dreamstime.com