Wednesday, September 18, 2019

Of Rice, Farmers, and Agriculture Funds

Originally: THE REAL SCORE FROM AN ENLIGHTENED TRADER & MORE CONCERNS ABOUT THE IRR
by:  Paulino Jose Misa

(This was PM'd to me by a "truly concerned" trader friend)
As you probably know, next week is the start of the harvest season for rice in Regions 1, 2 & 3. This means now is the time when farmers need to start planting the seeds for transplanting in Oct and for traders to start buying from farmers.
I have just spent the whole day with farmers from Regions 1 & 2 and was surprised to hear complaints about the low prices of palay even from those with high yields. It turns out your instincts were more spot-on than mine.
I asked the farmers about their true costs to determine their break-even, and got the following figures. You probably know these figures already, but thought of sharing them with you nonetheless to help with your analysis.
Figures are in PHP per kg of palay:
PLANTING
Seeds (hybrid) = 1.25
Labor (to help transplant the seedlings) = 1.05
[One needs around 12 persons @350/day to transplant seedlings on a hectare of land. Six is actually enough for a day’s work, I am told, but local labor tends to work deliberately slow in order to force the farmer to pay for another day’s work and to provide meals for the day. As a result, a farmer tends to hire more laborers to finish earlier. There is no difference between wages for one day or half-day.]
Fertilizer = 1.00
[This assumes 4 applications per cycle @P1,000/ha/application: before transplanting and flooding, during the vegetative stage, when panicles are forming, when palay start ripening.More might be spent depending on color of leaves, type of soil, health of palay, etc.]
Pesticides = 0.30
[This assumes 300/ha/application x 4 apps per cycle against the usual pests - leafhopper, bugs, maggot, skipper, crickets. More might be spent depending on pests.]
Total expenses during planting = 3.60/kg
HARVEST
Labor = 1.75
[20 persons are needed for 1/2 day of harvesting work per ha @ 350/person/day. As in the planting season, half this number is enough, but farmers can not afford delayed harvesting so they’d rather hire more to finish harvesting quicker. Laborers charge the same rate even for half day work.]
DRYING
Hauling of “wet” palay = 0.20
[This is the cost to haul the wet palay from the farm to a drying center. Loading rate is 4/sack and 4/sack for unloading. A sack =40kg for wet palay, 50kg for dry. Thus, a 4,000kg harvest per ha = 100 sacks when wet, 80 when dry. Handling rate is halved for provinces that use 25-kg sacks.]
Drying fee = 3.00
[This assumes the use of drying machines. Rate is reduced by 0.50 if the drying center buys the hulls (husks). Rate can also be halved if drying is done under the sun, but a farmer still needs to pay min of 1.50/kg for labor to lay the palay and turn them over at regular intervals, use of a drying area, and loading and unloading. It is now illegal to dry palay on roads.]
Transport (farm to drying center) = 0.25 .
[Standard rate is 10/sack x 100 sacks / 4,000kg. This is just to the drying center. Another 0.20 needs to be spent to transport the dried palay to a separate warehouse. Note that a 10.00/sack rate is normally for farms along farm-market roads. Rate is usually doubled for farms far from roads or when tricycles are used. Additional hauling expense might also be incurred.]
Total expense during harvest (incl drying) = 5.20
Total break-even = 8.80
Add: 20,000 minimum living expense allowance for the farmer for 4 mos. This is equivalent to 5.00/kg
Revised break-even = 13.80
[I was informed that the DA assumes a break-even of 12/kg. The farmers said the DA is ignorant of the actual field costs of labor. 14/kg seems to be a more realistic break-even.]
[At an NFA buying price of P18/kg, dry, CIF NFA, the gain of the farmer becomes 3.75/kg — since he incurs additional cost of 0.45 to haul his palay to the NFA warehouse. This converts to 15,000 if the farmer continues to yield only 4t/ha. This amount is just enough to cover cost of planting for the next season. He still needs to borrow for his own family requirements and to finance harvest.]
I have no way of confirming these numbers, but who am I to argue with the farmers themselves. I was with farmers whose yields vary from 8-12 tons/ha. Yet they too complain that the low cost of palay has forced them to reduce personal expenses or reduce some farming inputs (which consequently affect yield). I immediately thought I ought to confess to you my error.
I also discovered that about 60% of the farmers in the co-ops we contract with are under tenancy arrangements, which means at least 30% of harvest go to the landowners. In some areas, another 5% go to “people’s taxes.”