More Corn Please
An obvious sign of an improvement of the economy is the expenditure pattern of consumers. And when an economy is just surging forward, the expenditure pattern reflects heavily on food items that were considered luxuries before but are now affordable to the greater part of the consuming public.
A classic economic case for this is China with its booming economy. Before, China was exporting a lot of its commodities. Now it is no longer able to export corn as it has to satisfy the increased demand of feedmills to support increased population of poultry and livestock. The domestic demand for chicken and pork had increased, outstripping the ability of local farmers to produce more corn.
As a result, China is now in the world market to buy and import corn (a complete turnaround from their exporting position some years ago) to meet its domestic demand, spiking prices to new levels. (And coupled with this demand from feedmillers, corn is now in demand for bio-fuel input, thus further aggravating the demand-supply picture.)
From $200 dollar per ton a year or two ago, the price of corn in the international market now hovers between $300 and $310 per ton, and the price plateau is not on sight, thus, making it very expensive (in relation with prices of local meat products) to import.
But importation must be done to assure local feedmillers supply to operate their mills. By government estimate, there will be a short fall of about 500,000 metric tons for 2008, but millers’ estimate is way above that figure that at this early, they are now requesting permit to import and “bite the bullet” of high import price.
This domestic scenario is always seen and felt year in and out. The clamor to import is a position taken by millers in the absence of a concrete assurance that domestic supply can suffice and tide them over until the next harvest comes along. Apparently, there is none in storage or inventory outside of their warehouses that they know of that can be sourced in time of need.
Though local production had made some headways, these were not enough to meet the increasing demand. The uptrend in poultry and livestock population had kept pace with the market, and sadly, production is still lagging behind.
That brings to my mind the boom in local corn production some three or four years ago that farmers in Central Luzon, notably, in Tarlac, Pampanga and Pangasinan went into corn production, not only a crop a year but twice, and some, as much as three cycles in a year, converting sugar and tobacco lands into corn. However, this endeavor did not last long as corn prices proved too volatile, and was not able to deliver the expected economic gain.
As in raw commodity marketing, the surge in supply dampened the price level as farmers would harvest all at the same time, and sell to same feedmiller(s) in the area. It was a boom or bust situation in the absence of post-harvest facilities to catch the production flow from the farmers. While some persisted and continue to produce corn, some fell by the wayside and reverted back to their previous crop, or it not, limited corn production to one cycle.
But with the decreasing stock available in the world market, and the resulting up-tick of corn prices, revisiting the weaknesses of local corn production and putting in place effective policy intervention can motivate again our farmers to produce more corn to meet domestic demand.
Efforts to link corn farmers and feedmillers have been in the pipeline for ages but had proved to be too nebulous to claim success. The supposedly corn contract growing schemes initiated by millers also did not get off the ground. And many other forms of direct linkage between primary producers and millers have not performed as well. A new market dictated approach should now be developed to benefit both parties.
A good intervention is along the line of farm clustering for the purpose of centralizing provision of technical support and pooling of facilities as in the establishment of post-harvest facilities and common transport facilities.
Success stories in corn production, especially those done through cooperative efforts should be made known and disseminated to other clustered areas for replication. Continuing effort to reduce the cost of doing business (planting and marketing) should be addressed through policy intervention by letting market forces dictate directions.
Now is an opportune time to further motivate corn farmers to produce more, and hopefully, policy initiatives from government can make this motivation sustainable on the long term, for farmers to feel the fruits of their labor and efforts.
And why not?
