The Philippines’s average palay or unhusked rice production cost last year rose to a 7-year high and returned to the P12-per-kilogram territory, due to expensive fertilizer and higher wage rates.
The average cost of producing a kilogram of palay in 2021 rose by 4.52 percent to P12.02 from P11.50 driven by higher expenditures on fertilizer and hired labor, the latest Philippine Statistics Authority (PSA) data showed.
It was the highest palay production cost since the P12.33 per kg recorded in 2014, “reversing” whatever gains the rice sector made after the annual P10-billion Rice Competitiveness Enhancement Fund (RCEF) took effect in 2019.
PSA data showed that the average cost per hectare of palay last year reached a record-high of P49,920, 6.15 percent higher than the P47,027 recorded in 2020. Likewise, cash costs, which accounted for nearly half of the total costs, rose to a record level of P24,258 per hectare.
PSA data showed that cash expenses for fertilizer posted the highest growth rate at 31 percent as it reached a 13-year high of P5,019 per hectare. Palay farmers spent P10,794 per hectare for hired labor last year, 5.4 percent higher than the P10,241 recorded in 2020. Historical PSA data showed that this was the highest hired labor cost on record.
The increase in palay farmers’ total costs outpaced the increase in their gross revenues per hectare which inched up by 1.57 percent on an annual basis. PSA data showed that rice farmers’ gross revenues last year reached P69,600 compared to the P68,519 recorded in 2020. This means that the net income of Filipino rice farmers declined by 8.43 percent year-on-year to an 8-year low of P19,680 per hectare.
Rice farmers earned only P0.39 for every peso they spent in producing the staple, which was 15.21 percent lower than the P0.46 net profit-cost ratio recorded in 2020.
The average farm-gate price of palay last year declined to a 9-year low of P16.75 per kg. Despite the reduction in farmers’ income, nationwide average palay yield rose to a record level of 4,154 kg or 4.154 metric tons (MT) per hectare, PSA data showed. Philippine Chamber of Agriculture and Food Inc. President Danilo V. Fausto said that while the 4.15-MT average palay yield nationwide is “commendable,” the government can still improve farmers’ productivity.
At the rate the local palay productivity is improving, Fausto said the national government may have a difficult time reaching its goal of harvesting an average of 6 MT per hectare. At this point, he noted that the gains from the RCEF had been “reversed and may not have been felt at all.”
“What has RCEF done? The law is good but it seems the implementation is the problem. The spirit of the law is very, very good,” he told the BusinessMirror. “There was something wrong with the implementation since the yield improved by 60 kilograms only from 2020. The government should review it.” Fausto also said the Philippines cannot do anything about the spike in fertilizer prices as this was largely due to Russia’s invasion of Ukraine.
He argued, however, that the continuous rise in labor costs is something that the government must look into. He claimed that rising agricultural wages are counterintuitive to the government’s mechanization program that seeks to cut labor costs by making farming more efficient through the use of machines.
The goals set by the government for RCEF were to improve nationwide palay yield within the range of 5 MT per hectare to 6 MT per hectare while bringing down production cost to around P9 per kg.