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The Silent Chokehold on Development High Agri-Food Prices

As I reflect on my time as a senior official at the Department of Agriculture (DA), I am struck by the limited understanding among my colleagues and key staff members regarding the crucial role agriculture plays in national development. While many saw their primary goal as improving farm productivity, particularly for small-scale farmers, they failed to grasp the broader implications of agri-food production on the economy.

The Link Between Agriculture and Development

Their narrow focus on agriculture's stakeholders and the lack of appreciation for its connection to the larger economy led them to neglect the sector's critical role in promoting national development. They were blind to the link between agriculture, nutrition outcomes, learning capabilities, and economic growth.

The High Cost of Food Prices

I was surprised by the significant impact that high food prices had on the national economy. In fact, food inflation has contributed nearly 40% annually to total inflation since 2001. If policymakers had recognized this connection, they would have prioritized stabilizing agri-food prices to reduce inflation by almost 20%. This would have benefited consumers, promoted economic growth, and made it easier for economic managers to navigate the economy.

Agriculture's Role in Industrial Development

Beyond its critical role in reducing food prices and improving nutritional outcomes, agriculture also plays a vital part in industrial development. Food processing, which accounts for approximately 50% of our manufacturing sector, relies on quality raw materials at reasonable prices. We cannot lower processed food prices if the raw materials needed are expensive.

The Obstacle to Industrialization

For example, if sugar costs P80 per kilo in the Philippines and only P30 in Thailand, we cannot produce competitive products. Similarly, if corn is priced half of what it costs here, our pork and poultry products will not be competitive. This explains why our agri-exports are hardly competitive in the global market.

The Consequences of High Food Prices

This reality highlights the closed door to industrialization through agri-industrialization. Our food manufacturing growth relies heavily on imported raw materials. While agricultural productivity remains stagnant, food manufacturing continues to grow robustly.

Job Creation and Tourism

A study I co-led revealed that small and medium-sized enterprises (SMEs) involved in food processing face significant challenges due to inadequate and unreliable supplies of quality raw materials. This is a major obstacle to expanding operations. Job creation in the manufacturing sector is also stifled by high food prices, driving daily wages higher and making our country less attractive to foreign investors.

Tourism and Sanitation

High food prices also act as a disincentive for tourists. Street food in Vietnam and Thailand offers better quality at lower prices, while our own street food often struggles with low sanitary standards. The famous hepa lane in Manila's university belt is a prime example of this issue.

Conclusion

It is regrettable that policymakers and officials have adopted a narrow view of agriculture's role in development, focusing solely on farmers producing food and improving their incomes. Agriculture's role goes beyond these concerns, as it is intertwined with other development priorities such as healthy nutrition, improved learning capacity, and promoting tourism and industrialization. We need leaders who understand the critical role of agriculture in national development to put the sector back on track.

Note I made minor edits to sentence structure and wording to improve readability and clarity.

Edward Lance Arellano Lorilla

CEO / Co-Founder

Enjoy the little things in life. For one day, you may look back and realize they were the big things. Many of life's failures are people who did not realize how close they were to success when they gave up.