MANILA, PHILIPPINES — While the Philippines’ economy experienced one of the highest growth rates in emerging economies in 2022, the nation’s agriculture sector is struggling, impacting food security and poverty rates.

More than half of the country’s 100 million people live in rural areas, according to the International Fund for Agricultural Development, and more than a third of them are poor. Poverty among farmers is far higher than the national average and almost three times greater than poverty among urban households. 

Two key factors have stagnated the agriculture industry compared to regional neighbors such as Vietnam, Indonesia and Thailand — the low productivity in rice and the failure of the sector to diversify into value-added products for local consumption and export, the World Bank said. 

Rice is the staple crop in most diets, and the Philippines is the world’s eighth largest producer with an estimated crop of 19.9 million tonnes of rough rice production in 2023-24. The country imports wheat for bread, pasta and pastry, but totals have remained flat because of higher milling wheat prices. Corn production is expected to increase due to higher subsidies and the conversion of banana plantations.

Rice is the staple crop in most diets, and the Philippines is the world’s eighth largest producer

Imports of soybeans and soy meal are expected to increase in 2023-24 in line with population growth and the opportunity to use the meal in feed for broilers and aquaculture. 

At the end of June, the World Bank approved a $600 million initiative to increase market access and income for farmers and fishermen in the Philippines. The funding will support inputs, production, marketing and enterprise management, as well as infrastructure such as roads, bridges, irrigation systems and post-harvest storage. It also will provide technology to reduce post-harvest losses.  

“Almost 60% of the poor work in agriculture in the Philippines, so accelerating the growth of agriculture and fishery is vital for the country’s development overall and for poverty reduction,” said Ndiamé Diop, World Bank country director for Brunei, Malaysia, Philippines, and Thailand. “Improving access to markets will help farmers and fisherfolk in rural areas raise their incomes, provide for their families, and elevate their standards of living.”

Crop production, consumption 

Milled rice production is expected to increase by 575,000 tonnes, to 12.55 million tonnes, in 2023-24 due to increased government spending for the sector, according to a report from the Foreign Agricultural Service (FAS) of the US Department of Agriculture. The Philippines Department of Agriculture’s rice program will receive double the funding it received in 2022, the FAS said. 

Yields are expected to increase 2% due to the expansion in the use of hybrid seeds and the correct application of fertilizer rates due to more assistance programs to cover the cost. 

Consumption is expected to increase in line with population growth and a shift from bread to rice, the FAS said. 

Corn production is expected to increase from 7.9 million tonnes to 8.4 million in 2023-24 due to increased subsidy to the sector, which is expected to increase national yields by 2% or more. An additional 70,000 hectares of corn area was expected to be added this crop year. 

Due to the extension of lower tariffs until Dec. 31, corn feed consumption is expected to increase 300,000 tonnes, to 6.9 million tonnes, the FAS said. Corn is the preferred feed ingredient, particularly for broilers and layers. 

Soybean meal is also a key feed ingredient for broilers and the aquaculture sector. Meal imports are expected to reach 2.9 million tonnes due to expansion in both sectors. Those increases will more than offset losses in pigs due to African swine fever, which was discovered in Cebu province in March, negating the ASF-free status of the region.

Soybean meal inclusion in aquaculture feeds can go as high as 40% while pig feeds can only go as high as 25%, the FAS said. 

Flour milling 

Total wheat imports for 2023-24 are estimated at 6.5 million tonnes, according to the FAS, with consumption flat for milling use and down for feed use. Hard wheat imports are used to produce pandesal, Pinoy Tasty and other bread while soft wheat is used in cakes, pastries, noodles and crackers, according to the FAS. Pasta is made with 50% hard wheat and 50% soft wheat; there is minimal importation of durum. 

The United States is the leading exporter to the Philippine wheat milling industry, but its market share dropped from 96% in 2020-21 to 72% in 2022-23 due to the higher prices of US milling wheat. Australia and Canada increased their milling wheat exports to the country by 641% and 11%, respectively. 

The United States is the leading exporter to the Philippine wheat milling industry

Fast food drives the demand for bread, but overall bakery products are declining. Cake sales are declining because of higher costs driven by higher wheat and sugar prices, the FAS said. There is growth in noodles since they are easily prepared at home. 

Along with increasing wheat prices, millers face several challenges, including increasing freight cost, low consumer purchasing power that leads to low flour demand and under-utilization of capacity. Despite this, the FAS said one industry player is almost doubling its capacity this year in anticipation of growth in the years ahead. There are 22 companies engaged in flour milling in the Philippines with a 53.7% utilization rate of 7 million tonnes. 

Millers have started diversifying flour production or customizing according to customer product requirements, the FAS said. With unutilized capacity, there is the possibility of consolidating smaller flour mills as well as flour or flour product export opportunities, it said. 

Biofuels production

Biofuels consumption is expected to recover in 2023, with fuel ethanol demand growing 8% to 693 million liters and biodiesel increasing 14% to 230 million liters. Both sectors had stagnated recently with no increase in blend rates. 

Ethanol production has remained flat at 375 million liters because of feedstock problems. Sugarcane-based materials, including molasses and sugarcane juice, are the primary feedstock for ethanol while coconut oil is the chief feedstock for biodiesel. 

There are 13 accredited ethanol producers in the Philippines with a total production capacity of 466 million liters per year. An additional 38 million liters is expected by the end of 2023 and another 45 million liters is under negotiation, the FAS said. 

Three ethanol producers use sugarcane while the rest use molasses. Even though 80% of total molasses is used for ethanol production, the supply is still not sufficient, the FAS said. Corn has been recommended as a feedstock, but it would run counter to the government’s food security program and would require huge investments to establish facilities. 

There are 12 accredited biodiesel producers with a total production capacity of 677.9 million liters per year. Additional capacity of 288.88 million liters is expected by the end of the year. Actual production in 2022 at 203 million liters was only 30% of the registered capacity.