Cash Crops

I suspect overall GDP growth for 2007 will be robust. A big portion is accounted for by agriculture, and the past year has been a good one. The Philippines remains a major rice and coconut producer (it is the largest coconut producing country, I'm not so sure if it has maintained that position) and harvests for both crops have been encouraging.

The country's rice production volume is not sufficient enough to support its own rice consumption requirements, such that we have become the biggest rice importer in the world. Ironically, the country houses the International Rice Research Institute (IRRI) which develops and propagates high-yield varieties all over the world.

Anyway, demand outstripping supply means palay prices at the farm gate should be higher. Alas, this is not the case. Price stability of the major staple has to be maintained to avert political and consumer backlash. And thus, importing rice from Thailand and Vietnam, and even the US, has been resorted to stabilize stock supplies. Consequently, price levels have been maintained at artificially low levels. In fact, the National Food Authority is the biggest loss-generating GOCC (Government-Controlled and Owned Corporation), piling up huge losses primarily due to the price subsidy policy on rice.

Copra prices, however are surging, with demand coming from both industrial (i.e. as bio-fuel) and commercial purposes (e.g., cooking and baking requirements).

With oil prices hitting US$100 a barrel as OPEC continues to control production quotas, the ever-present tensions in the Middle East, the US stacking up on emergency buffer supplies and the huge, huge Chinese requirements, alternative fuel sources are starting to get noticed.

Bio-fuels from vegetable sources such as maize, sugar cane, palm and coconut oil (there's coco diesel already) are increasingly being utilized (although not by the major foreign oil companies). But it is only a matter of time before consumers will take to it. In fact, in Brazil flexi-fuel cars are now very much in common, driving prices of sugar cane (the country's main source of bio-fuel) to unprecedented levels.

In addition, the current recrudescence of coconut oil, which slumped when soybean and canola were found to have lower saturated fats and thus promoted to be healthier, is accounted for by the fact that along with palm oil, it does not produce the deadly trans fatty acids (trans fats) responsible for heart attacks when partially hydrogenated (e.g., margarine) for commercial purposes.

The demand is so strong that even our copra buyer would send his truck over to our house to pick up the copra for further processing in Tagbilaran. Farmers in the area are scrambling all over themselves to plant idle lands with coconut trees to meet the pressing demand.

I suspect corn, or maize, and sugar cane are benefiting from this bio-fuel trend as well. Have you ever wondered why Senator Zubiri has been moving heaven and earth to push legislation supporting a bio-fuels industry? His family owns a large sugar cane plantation in the plateaus of Bukidnon and will likely be among the first to reap the benefits from this legislation, along with the hacienderos of Negros and Iloilo.

So this 2008 and beyond, for farmers the cash crops to consider are: coconut, palm trees, maize, sugar cane and palay. Wow, I sound like a farmer!