EO 765: Good for bakers, bad for corn farmers

First published in MindaNews.com. President Arroyo signed Executive Order 765 in December 2008  claiming that  “reduction on tariff on food wheat would help stabilize the price of bread and other baked food products.” Unfortunately, former agriculture secretary Leonardo Montemayor said in a report that the order did not only include the lifting of tariff on importation of food wheat or milling wheat, the ingredient used to produce bread, but also on feed wheat, which like corn, is used as animal feed.

Excess feed wheat supply brought by the zero tariff has competed with local corn supply, Roderico Bioco founding chair of the Philippine Maize Federation Inc. told MindaNews.

The implementation of EO 765 has led to an estimated P6-billion losses in income for corn farmers and at least P1-billion loss in revenues for government, Montemayor, now a member of the House representing of the ABA-AKO party list, said.

The lowest price for yellow corn was P6.50 per kilo or P6, 500 per MT, lower than the production cost of P10.

The  Bureau of Agricultural Statistics (BAS) reported  last week that the price of corn had dropped from P 9 per kilo to P7.50 during a five-week period.

The executive order was effective until June 2009 but favoring sectors, including the livestock feed millers lobbied for the extension. The corn industry stakeholders such as the Philippine Maize Federation Inc. and ABA AKO party list lobbied against the extension.

“As a consequence of this ill-advised EO, by July 2009, warehouses of our feedmillers are still full and carriy an excess inventory of more than 800,000 tons of these corn substitutes. Local corn traders in northern Luzon are still left with more than 100,000 tons from April-May 2009 harvest,” the PHilMaize said in an open letter on August 18, a copy of which was furnished to MindaNews.

Corn prices have gone down to P6 to 6.50 in Isabela and in Bukidnon, the lowest since 2001, the PhilMaize said in a statement.

Feed wheat was included in the order, from seven percent tariff, to avoid misdeclaration in customs, a common problem encountered as a way to evade import restrictions.

The government ordered to include feed wheat for zero tariff restriction to avoid complications in determining the veracity of declarations. But Bioco said there were talks customs can distinguish between feed wheat and milling wheat if they so desire.

Bioco said as expected, reduced planting intentions in the third quarter of 2008 resulted in rising local corn prices in the fourth quarter. But instead of allowing high prices to encourage planting intentions, Bioco said, the Department of Agriculture defied laws of economics and recommended to allow zero tariff importation of feed wheat under EO 765, suppressing rising prices of local corn. It later caused unnecessary injury to thousands of corn farmers who unwittingly got attracted by the high corn prices in late 2008 to early 2009 and returned to planting corn.

But they were surprised, he said, to find out that a huge over importation of corn and corn substitutes crashed in the local market.

Meanwhile, President Gloria Macapagal-Arroyo’s issued Executive Order 818, which extended zero-tariff only to milling wheat.

EO 818 was prompted by House Resolution No. 1218, which the House of Representatives adopted before the adjournment.

But the effect of the tariff free importation had already taken its toll, with farmers now experiencing low corn prices, Bioco said.

By the time EO 818 was already lifted, world prices of corn had already gone up so it was no  longer an  option for importers.

The government support price for corn is P13, while the current international price is P14 per kilo prompting farmers to go to National Food Authority stations with truckloads of corn, only to find that their harvest will not be bought at the promised support price of P13.

“Farmers lose whether they sell at a low price or keep their corn inventory longer, in which case they spent on that day’s transportation for nothing,” Roger Navarro, PhilMaize president said in a statement to the media.

Another complaint received by Philmaize from farmers, as quoted in the same report, was that the NFA stations were buying their corn with palay procurement funds, which resulted in delays in the release of payments for corn deliveries.

NFA spokesperson Rex Estoperes as quoted in Manila−based media said that the budget for corn procurement for the rest of 2009 was set at P1.244 billion.

The amount would be enough to buy only 95,692 MT of yellow and white corn if NFA buys at the new support price of P13—much lower than the P3.9 billion budget initially set by the Department of Agriculture.

“The policy recommendation to allow zero tariff on feed wheat importation by the Department of Agriculture under Sec. Arthur Yap without prior consultation with the vulnerable sector affected has now taken its toll on all our corn farmers. PhilMaize expects Sec. Yap to exercise expediency and resolve to mitigate the negative impact of the ill−advised policy that originated from his department that ultimately resulted in the issuance of EO 765 signed by President Gloria Macapagal Arroyo at the expense of our local corn farmers,” the Philmaize said in the open letter.

“We are very sad to note that in the process of procuring corn, NFA is denying many of our corn farmers access by mere technicalities such as strict requirements impossible to comply. This to our mind is very unfair. To start with, this situation is the fault of our government who failed to provide the necessary funds to set up enough post harvest facilities. Our government may have to take extra ordinary effort to correct the situation and in the process lose money. Then so be it,” Philmaize said in the open letter.

PhilMaize said in the letter said signed by PhilMaize president Roger Navarro that should the P3.9 billion prove not enough to influence the market, then the government should provide more funds to correct the problem they created in the first place when they issued EO 765.

“PhilMaize strongly believes that this matter should be resolved decisively, objectively, positively, and quickly,” Navarro added in the letter.

About mindanaw

A Journalist from Mindanao

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