No Free Lunch

Agriculture beyond rice

Is a Philippine agricultural takeoff finally in the offing? The much-debated rice tariffication law, the main effect of which is to open our rice trade, heralds the possible unleashing of the Philippines’ full agricultural potential, and make it the economic driver it has been for our closest neighbors. For decades, agriculture has been the drag on the Philippine economy, always lagging far behind growth in industry and services—all because too many of us seemed to have the mindset that rice is Philippine agriculture.

One would think that Vietnam, a major rice exporter, would be dominantly focused on that commodity. But as rice area grew by 20 percent in the 1990s, the area under industrial crops increased far more rapidly at 83.4 percent. Like Vietnam, Thailand deliberately pursued agricultural diversification, and while the world’s top exporter of rice has also been a top exporter of rubber, sugar and cassava.


Here, attention and budget have been hogged by rice—and have little to show for it. And so, while we earned only $5 billion from agricultural exports last year, Thailand and Vietnam both got eight times as much from theirs. Thailand’s exports of natural rubber alone already equal the value of our total farm exports.

Many believe that agrarian reform stifled Philippine agriculture, leading to small farmholdings that have deprived our farm sector of the efficiency and productivity that come with economies of scale. But small farmholdings have not stopped Thailand, Malaysia and Vietnam from achieving much more dynamic agricultural sectors than we have. It is not farm ownership that matters, but farm organization, and our neighbors’ example should guide us on how to proceed with an agriculture expansion push no longer unduly fixated on rice, to the relative neglect of other crops.


It’s ironic that apart from us having trained our neighbors’ agricultural scientists in decades past, key to our neighbors’ agricultural dynamism has been something we actually pioneered in the 1970s. It’s called contract farming, a scheme used by Arbor Acres for poultry production in the United States. San Miguel Corp. applied it in its poultry operations at around the same time agribusiness giant Charoen Pokphand began adopting it in Thailand. In both the Philippines and Thailand, market supply of chicken meat dramatically rose, sharply reducing its price. “For the first time,” wrote Thai agricultural economist Nipon Poapongsakorn, “chicken meat had become the important source of cheap protein for the poor and the lower middle class.”

What is contract farming? The scheme involves small farmers supplying agreed quantities of a crop or livestock product to a large processing company, based on the latter’s quality standards. The company pays a predetermined price, and supports the farmers with assistance in land preparation and provision of inputs and production advice. Coalition for Agri-Fisheries Modernization in the Philippines chair Dr. Emil Javier recently wrote of its virtues: “For small farmers, the arrangement gives them ready access to credit, inputs and modern technologies which they have difficulty obtaining on their own… (and assurance) of market prices designed to make them profitable. In study after study and country after country, contract growers are known to be much better off than their independent, unorganized counterparts.”

Thailand had since expanded contract farming to many other products including pork, sugar, vegetables, pineapple, oil palm, various fruits, potato, dairy, tilapia, shrimp and sea bass. It has been credited for Thailand’s dynamic agricultural sector growth and exports. Vietnam has also embraced the model for its rapid agricultural diversification and growth.

In the Philippines, beyond poultry, we now see it used in oil palm in Mindanao, and by Jollibee Foods to procure onions and calamansi. The scope remains huge, and in an agricultural sector less fixated on rice and targeted at wider diversification like in Thailand and Vietnam, it should be our vehicle to propel Philippine agriculture from being a drag to a driver of the economy—and uplift our farmers’ lives in the process.

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TAGS: agriculture, Cielito F. Habito, No Free Lunch, rice tariffication law
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