Philippines: Food prices may rise further as peso weakens
MANILA, Philippines — Filipinos will have no choice but to spend more as prices, particularly of food items, continue to rise due to the continued depreciation of the peso against the dollar.
Last week, the peso depreciated to a new record low of 57.43 to $1.
A weaker peso means it will be more expensive to import finished products and raw materials necessary in local food production since these are paid in dollars.
Since the country relies heavily on imported inputs and food products, agriculture stakeholders said the continued depreciation of the peso against the dollar is going to hurt everyone.
“It is going to be hard on everyone, for consumers and producers alike,” United Broilers and Raisers Association (UBRA) president Elias Jose Inciong said.
Philippine Chamber of Agriculture and Food Inc. (PCAFI) president Danilo Fausto said consumers face higher food prices as the continued depreciation of the peso pushes up prices of imported agricultural products.
However, the weaker peso can also mean local farmers have a fighting chance against imported food items, such as rice.
“It could provide leeway for farmgate prices to move up to compensate farmers for higher costs of fertilizer, fuel and other production inputs,” Federation of Free Farmers (FFF) national manager Raul Montemayor said in a text message.
The United States Department of Agriculture (USDA) said the Philippines may further increase its rice imports to 3.4 million metric tons this year from 3.2 million MT, largely coming from Vietnam.
Filipino farmers have been discouraged by the influx of cheap imported agricultural products as these have depressed prices, forcing them to bring down farmgate prices and end up with losses.
Montemayor said a weaker peso should also be good for exporters.
“But unfortunately, we have not established programs to help our exporters avail themselves of trade opportunities. We are a net food importing country now, so the net effect will be a higher agricultural trade deficit,” he said.
To produce food, the country heavily imports agricultural inputs such as fertilizers, animal and fish feeds because the local supply cannot meet the full requirements of the sector.
The Philippines is also a net importer of oil, which is heavily used in the agriculture sector – by fishermen for their boats, and farmers for their tractors.
The prices of these farm inputs have been skyrocketing due to the Russia-Ukraine war and the lingering effects of the COVID-19 pandemic.
For producers, Montemayor said imported farm inputs and raw materials used for processing would also become more expensive.
Agricultural inputs like fertilizers, fish and animal feeds will remain high, affecting the profitability of producing food commodities, Fausto said.
“This will increase the risk profile of producers because of the more expensive inputs while the market for their products will contract as retail prices surge upwards,” Inciong said.
The ability to import the same volume will also be restricted due to the high prices.
“This price increment will then be passed on to the consumers as the natural consequences of business, for they want to recover and earn from their investment,” Philippine Maize Federation Inc. president Roger Navarro said in a text message.
Boost local production
The world has been reeling from supply chain disruptions and climate change, sending global food prices soaring.
To shield the country from the impact of global supply chain issues and foreign exchange fluctuations on imports, the Philippines must work to produce its own food requirements and stop importation, Fausto said.
Inciong is hopeful that the impact of climate change and other supply chain disruptions will serve as a wake-up call to policymakers and pundits who he says espouse import liberalization as a solution to everything.
“All these years they have been proudly saying, ‘look at Singapore, it is 90 percent dependent on food imports, and yet it is food secure,’ to justify import dependence. Well, to a large extent, they got their doctrinal wish. We are more import-dependent than ever and in really deep trouble,” Inciong said.
Navarro said it would be a tall order to counter the impact of these global issues because the Philippines is too entrenched in importation. He said policymakers need to change their strategy and focus on local production.
“It’s very sad but our fundamentals were not properly implemented. Our agriculture is very much neglected for reasons that our policy people were in the mindset that we can import everything in any given time until we are now experiencing this crisis,” he said.
“As a country we are not strategic in our planning, especially in agriculture. We don’t even have the post-harvest facility and storage for rice and corn so badly needed for the longest time. Our planners are short sighted and reactive. We must change our mindset,” Navarro said.
To support local food production, Montemayor said the Department of Agriculture (DA) should be ready to support the next production cycle or face a bigger problem next year with costlier food imports and flat or decreasing food production.
“But that’s the problem. There is no clear policy on support program—irrigation, seeds, credit, fertilizer, and assurance of reasonable price for palay. Without these, production will go down and we will have to rely more and more on expensive imports,” he said.
In the immediate term, the government must step up its efforts to provide subsidies and credit to farmers.
“The credit guaranty system should also be reviewed to make it accessible to cooperatives in order to build common service facilities to enhance competitiveness. There are more guarantees for real estate projects than for agri-fisheries,” Inciong said.
He said government must also provide improved and accessible warehouse receipts system, for storage when farmgate prices are very low.
In the medium-to-long-term, the UBRA official said there should be a more meaningful implementation of the country’s World Trade Organization commitments and the laws like Agriculture and Fisheries Modernization Act and the Magna Carta for Small Farmers.
“We did not implement even the basic features of WTO like domestic support, trade remedies, and quarantine facilities and capabilities,” Inciong said.