Executive Director's Corner

Are scarce resources going to the right crops?

Posted on August 11, 2014 08:33:00 PM

Are scarce resources going to the right crops?


0  0 Google +0  0

M.A.P. Insights
Rolando Dy

POLITICIANS, THE MEDIA, and many experts and academics point to irrigation, farm-to-market roads and post-harvest facilities as the answers to agriculture development.
This article will specifically look at irrigation.

M.A.P. Insights — Niceto S. Poblador: “Let’s be professional: Upgrading the manager”
Preparing young minds”
M.A.P. Insights — Jose Rene C. Gayo: “Middle-class or millionaire farmers? It’s possible”
M.A.P. Insights — Niceto S. Poblador: “Teach business students strategy upfront”

Where are we? In 2013, there were 1.68 million hectares of irrigated land, or about 56% of the total irrigable area of 3.02 million hectares. The latter is based on land slope, and not necessarily water availability. For advocates, there are still 1.34 million hectares that need irrigation. At what cost? What is the tradeoff?

Of the total irrigated area, some 740,000 hectares were national irrigation systems, 576,000 hectares communal irrigation systems, 195,000 hectares private irrigation systems, and 167,000 hectares of other government-assisted areas, according to the National Irrigation Administration (NIA).

The irrigated areas did not improve much over the years. There were 1.57 million hectares irrigated in 1990 and 1.68 million hectares in 2013. The increment between 1990 and 2013 was only 7% or 110,000 hectares! Systems deterioration is a continuing problem. Low collection of irrigation fees for maintenance is another.

The main focus of irrigation in the country is rice. The Bureau of Agriculture Statistics showed that in 2013, the total irrigated harvested area for palay reached 3.24 million hectares. This meant that double cropping or more was fully achieved in many areas. Yield in irrigated areas was 40% higher, or 1.21 tons more per harvest. Compared to hybrid rice, the additional yield in the irrigated area is low.

From analytics, restoration or minor repairs of existing irrigation systems can be economically justified. The same for new but not all small systems. It is, however, difficult to find new large systems that pay off. This is because the economic (world) price of rice is low; and climate change is affecting yields and planted areas.

The government spends huge sums of money for irrigation. In 2014, the total irrigation budget was over P22 billion: new construction was P5.63 billion, restoration and improvement projects P14.25 billion, and foreign-assisted projects P2.48 billion. Irrigation is the largest chunk of budget of the Department of Agriculture.

New large irrigation systems are not cheap.

Take the Casecnan multi-purpose (power and water) project. NIA pays about P2.7 billion a year for water delivery for 20 years. This is water that will irrigate 37,000 hectares in the Upper Pampanga River Irrigation System. The present value of this payment is P450,000 per hectare.

Another interesting case is the payment to Napocor/PSALM by the government for the use of water from the San Roque Dam. The dam will irrigate 34,450 hectares. The non-power component (e.g. irrigation) costs more than P15 billio, or P435,000 per hectare.The foreign-funded Bohol irrigation project cost P600,000 per hectare about 10 years ago.

By contrast, tree crops like cacao, coffee, rubber, coconut hybrid and saba will need only P100,000 to P150,000 per hectare for investment. And no more maintenance subsidies thereafter. If these funds were personal monies, investment mix is suspect.

What is the criterion for funding irrigation projects? The National Economic Development Authority says the project economic rate of return should hurdle 15% for the investment.

Given the huge budget for locally funded irrigation, who evaluates the project proposals and monitors the outcomes? The basket of projects, including 17 small reservoirs, are subjected to political interference and “favored” contractors. Impact evaluations of these projects must be made by independent experts — whether they achieved the increases in areas, yields, and farm incomes as well as rates of return.

We have become obsessed with irrigation and have neglected poverty-alleviating crops.

First, there are many viable projects in tree crops than irrigation. They include hybrid coconut, cacao, coffee, rubber, banana, oil palm, and others. Coconut got about P2 billion while the high-value crops got a budget of less than P1 billion in 2014. They have over four million hectares versus 2.7 million hectares of rice land — 1.68 million hectares of irrigated rice land and over one million hectares of rain-fed land.

Rice farmers comprise about 25% of all farmers and fishers, compared to about 40% for tree-crops farmers.

With the low budget for tree crops, rural poverty will persist. In the meantime, the huge irrigation budget continues, covering maintenance subsidies and capital outlays.

Second, rice is not the only crop needing irrigation. From past research, over 95% of all irrigated areas are planted to rice. Corn, sugarcane, fruits, vegetables, aquaculture and other crops need irrigation too. For starters, corn, fruit trees and sugarcane need irrigation to be able to attain competitive yields.

Third, there appears to be a disconnect of the irrigation policy and program with poverty alleviation as well as the lack of metrics to measure the impact of specific crops and different types of irrigation.

A strategic review is needed on the poverty-reducing effects of irrigation versus tree-crops development. Targeting tree crops is sound. Tree crops are forest cover, and have carbon emission mitigation benefits.

Our South-east Asian neighbors — Indonesia, Malaysia, Thailand and Vietnam — have learned the inclusive impact of tree crops many decades ago. The Philippines is in a time warp. This is a sad outcome of politicians and the media not listening to experts, and for not looking at what the neighboring countries have done well.

Important note. On my past article on coconut, a well-known scientist, Dr. Severino Magat, noted that it is not fair to compare the yield of traditional coconut of 0.6 ton oil per hectare to the yield of well-managed oil palm at four to six tons oil per hectare. Coconut with moderate fertilization can yield 1.2 tons oil per hectare. New coconut breeds can give 2.7 to 3.3 tons oil per hectare. When a farm is intercropped with, say, cacao and banana, coconut can earn as much as oil palm for small farmers. Well put.

Rolando T. Dy Is the chair of the MAP Agribusiness and Countryside Development Committee, and the executive director of the Center for Food and AgriBusiness of the University of Asia & the Pacific.