Philippines: Who's really benefitting from hybrid rice subsidies?

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Author: GRAIN
Date: 19 April 2007
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GRAIN | 19 April 2007 | Hybrid rice files (2002-2010)

Subsidies have always been the lifeblood of the hybrid rice industry. It's the one constant within the otherwise varied experiences of countries that have adopted hybrid rice. The PR machine might help boost sales of seeds and chemical inputs but its the subsidies that are really needed to get farmers planting hybrid rice in their fields. Take away these subsidies and the hectarage soon starts shrinking, be that in China where it's largely grown, India where its struggling to make headway, or Indonesia where the government is pursuing an ambitious revival. Governments come up with all sorts of subsidy schemes, many of them quite creative, in order to develop, commercialise and promote the use of rice hybrids. The Philippines is no exception.

Back in 2001, under the government's Hybrid Rice Commercialisation Program (HRCP) - then attached to the Office of the President but later passed on to the Philippine Rice Institute (Philrice) of the Department of Agriculture – participating farmers received subsidised seeds and fertilisers at discounted rates. They also benefited from guaranteed crop insurance and enhanced production loans. It was a neat package that naturally attracted many capital-poor farmers.

For some of these farmers, the rice hybrids did increase yields, but for many, the crop failed. Reports flooded in of standing crops not forming any grain and increased incidences of destructive pests. It was a disaster that the government refused to acknowledge nor address. Instead it beefed up its hybrid rice promotion strategy in the media (tapping groups like the Philippine Science Journalists Association) and directed its PR department to focus on a few, often exaggerated, 'success stories'. New ways to extend its subsidies were devised (e.g. the National Food Authority putting priority on buying hybrid rice instead of inbred or traditional varieties) to keep hybrid rice production from sinking. Few farmers ended up profiting from this largess; rather the money flowed into the pockets of the rural banks and private loan institutions, the suppliers of machineries, the contractors of post-harvest facilities, and most importantly, the agro-chemical and seeds companies.

Private seed companies are the big beneficiaries of the hybrid rice programme. Because of the subsidies, they get a market that they'd otherwise never have. Under the Philippines programme, farmers only pay half the price of the seeds and the government covers the rest, while the companies receive their money in full. Moreover, while in the beginning there was some 'healthy' competition among five or seven seed companies, including Pioneer, Bayer, some local companies, farmers cooperatives, and the government's own rice institute, soon most of the subsidies on seeds were channeled to just one company - SL Agritech.

SL Agritech, a somewhat mysterious private tie-up between Filipino, Chinese and Singapore investors, offered a much below-market price for its seeds combined with a big PR campaign. By 2006, 65% of hybrid rice seeds were produced by SL Agritech, 25% by the government and 10% by other companies (Bayer, etc). But more than market forces were at work here.  The owner-chairman-CEO of SL Agritech, local billionaire Henry Lim Bon Liong, is closely connected to key government officials, such as former Agriculture Secretary Luis Lorenzo Jr, and was involved in crafting the hybrid rice programme. Lorenzo publicly considers him to be instrumental in acquiring the technical know-how (of hybrid rice) from China and applying it in the Philippine setting. Obviously Lorenzo's pronouncement was made to rally the support of the Filipino-Chinese community (particularly the Federation of Filipino-Chinese Chamber of Commerce that Henry Lim was then director of) around his agricultural modernisation programme, and his hybrid rice efforts.  For a time, Henry Lim reportedly worked as a consultant of the hybrid rice programme under Lorenzo, and then later moved on to become a member of the General Council of the Philippine Council for Agriculture, Forestry and Natural Resources Research and Development (PCARRD). At the moment SL Agritech is reportedly the sole authorized supplier ('preferred partner') of the hybrid rice variety accepted by Department of Agriculture officials. Going by the estimates of some farmers' organizations, SL Agritech may have already pocketed some P208 million (US$ 4.3 million) from the subsidy scheme.

Despite the subsidy, however, hybrid rice struggles to take root in the Phililippines. In fact, the Department of Agriculture acknowledged in early 2006 that there was a 50-60 percent drop-out rate among farmers who adopted hybrid rice. This was based on a mid-term assessment conducted by Philrice and STRIVE Foundation. The reasons were: the hybrid rice technology is 'quite new' to farmers and 'difficult' to follow and the rice is susceptible to pests and diseases, has high cost of production and is prone to seasonal variations in yield. It was the same case two years earlier.  In a 2004 study of the Philippine Institute for Development Studies (PIDS), a government research institute, the drop-out rate among hybrid rice adopters was found to be particularly high despite the subsidies extended by the government. The study acknowledged that the direct subsidy on seeds and fertilisers was unsustainable and recommended using other ways to support farmers. The Department of Agriculture seemed to take the recommendations to heart and began a phase-out of its subsidy that year, aiming to fully cut support in 2007. Officials at the Department of Agriculture and Philrice apparently believed that farmers successful with hybrid rice would be able to afford the seeds without subsidies.

But the policy change didn't last long. It now appears that the government is just reorganising the subsidy scheme again. Under the guise of meeting millennium goal targets, the Department of Agriculture reconstituted its subsidy scheme by forming 'rice clusters' seemingly to have more control of hybrid rice growing in the country. Farmers will be organised 'geographically' based on a set of contiguous rice areas of about 100 hectares within one-kilometer radius in a municipality. Farmers belonging to cluster areas will be assured of technical support, and will be given greater access to credit, high quality seeds, farm machinery and fertiliser discounts. They will also be assured of water supply and access to post-harvest facilities. This approach supposedly makes the GMA rice program easier to implement, monitor and document, as it organises individual farmers into a manageable entity (a cluster) and links them to bigger communities.

The GMA rice program that dispenses this subsidy envisions “a sustainable self-sufficient rice economy” – projecting a total of 16.67 million tons of total paddy production - this year (2007). But some farmers' groups are not convinced about the subsidy scheme nor about the target production for hybrid rice. Sentro Saka, a national network of farmers organisations, claims that there have been no significant reductions on the country's rice imports since the hybrid rice programme was launched six years ago. In fact, for the most part, rice imports have consistently increased, this year being the highest so far, projected to be about 1.7 million metric tons. The group also claims that although the Department of Agriculture previously boasted about the GMA rice program being the answer to rice production shortages, the Department's own data shows that hybrid rice barely contributed to the overall production.
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