THE PHILIPPINES' RICE PROBLEM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700040016-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 14
• Document Creation Date: December 20, 2016
• Document Release Date: March 28, 2006
• Sequence Number: 16
• Publication Date: September 1, 1972
• Content Type: IM

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Confidential
DIRECTORATE OF
INTEx,LIGENCE
Intelligence l~emorandurn
The Philippines' Rice Problem
Confidential
ER IM 72-133
September 1972
Copy N~..
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
September 1972
INTELLIGENCE MEMORANDUM
THE PHILIPPINES' RICE PROBLEM
Introduction
1. The Philippines was among the first countries to embark upon
the "green revolution." With a new variety of rice seed, Manila set out
in 1966 to increase production substantially and eliminate its longs~anding
dependence on rice imports. The program seemed a success initially, since
imports were avoided during 1968-70. But large imports were needed again
in 1971 and the country is heading toward record rice imports this year.
In fact, for the first time in many years Manila is asking Washington for
P.L-480 rice. This memorandum discusses Manila's effort to expand rice
output, assesses the program's shortcomings, and considers the potential
for renewed progress. It also evaluates the impact of the recent devastating
floods on the rice growing areas.
Background
2. Foy many years, rice has been the mainstay of the Filipino diet.
Today about 80% of the country's 39 million people eat rice as their
primary food, and it is grown on about 40% of the country's cui*ivable
land. Indeed, nearly all farms are partly devoted to rice production. Most
rice land - 6.6 million acres - is cropped using the lowland technique of
impounding water with dikes. Another 1.3 million acres are planted in
upland rice, which utilizes dry-land farming techniques. About half of the
land in lowland rice is irrigated and half depends on rainfall for its water
catch.
Note: Phis memorandum was prepared by the Office of Economic Research
and coordinated within the Directorate of Intelligence.
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3. While natural conditions are adequate for rice growing, tl~e
Philippines has consistently recorded some of the lowest yields of any major
producing country. During 1964-66, for example, Philippine rice yields
averaged about 1,150 pounds per acre, compare:i with some 1,250 to 1,760
pounds in other southeast Asian countries (see Table 1). Moreover, the
average 65% yields obtained in converting paddy rice to milled rice are
among the world's lowest.
Average Rice Yields for Selected Countries
1964-66
Pounds er Acre
South Vietnam
1,758
Pakistan
1,456
Thailand
1,452
Burma
1,444
India
1,253
Philippines
1,154
4. Gains in Philippine rice production traditio;ally have been due
mainly to expanded acreage rather than improved agricultural methods.
Between 1921 and 1966 expanded acreage accounted for 80% of the
increase in production. Rice output averaged an annual increase of only
about 2% during this period, about the same as population. As a result
the Philippines was never self-sufficient for any appreciable length of time.
5. In the early 1960s the Philippines reached the point where the
best lands were already under cultivation. In addition, during the 1960s
some rice acreage was planted to other crops, such as sugar and coconuts,
to which Manila : r~~ ?aving a high priority. Consequently, while the total
planted area i:;creased sl~~:vly, rice acreage declined. Because little was being
done to increase yields, i:ce production stagnated between 1961 and 1967
(see Table 2).
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a. 77re cror year ends on 30 June of the year stated.
b. Milled rice is 65% of paddy rice.
c. Calendar-year import figure changed to crop year by adding Together the two calendar years in which the crop
year falls and dividing by twu.
d. Cross ovailable rice is reduced 1076 to exclude rice used for non-human consumption purposes -seed, animal feed,
induslrlal ute, and waste.
e. Aasuminp, 3.5% annual growth compared with population growth of 3.1%; for estimating pmpoxs, rnnsamptlon was
assumed to M equal to available rice in 1962, a year when rice imports were s!!ght.
f. A dlscrcte Increase occurred in the rice production xnes in 1970 because of an improved reporting system. Now
much of the 1970 production rise was real and how much due to the atatistlcal change is unknown. Because the consumption
figure fa principally based on the production estimate for 1962, it too could be lncrcased. Such an adjustment in the
consumption series would make the decline in rice stocks shown for 1970 larger, and change 1971 and 1972 stock figures
from an increase either to a decrease or to no or little change,
g. Minimum estimate.
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Launching the "Gre?n Revolution" Among Rice Farmers
6. President Marcos launched the "green revolution" in 1966 in an
effort to fulfill his 1965 campaign promise to improve the conditions of
the rural population, most of whom live near the subsistence level He also
hoped the program would enhance his re-election chances in 1969. A major
objective was to boost rice production. Increased rice imports were
contributing to growing balance-of-payments problems. Average annual rice
imposts jumped from 109,000 metric tons in 1947-62 to 429,000 tons in
1963-67~ t ~ when imports fluctuated between 5?Ia and 14% of the rice supply
on a crop year basis (see Figure 1). In 1965, rice imports were $50 million,
or about 6% of total imports.
Figure 1
Philippines: Rice Imports as a Percentage of Gross Rice Supply
-- - -.. ..
--~ - --
15 ~~___.._~_~~-_.._----------_.__..~.-?-~--------------- ---
o ~-----1-------~-----~---1-------~---1 _-------L..__. _---x---
1962 63 54 65 66 67 68
7. The key to Manila's program was wi~9espread use of new high
yielding variety (HYV) rice seeds developed at the International Rice
Research Institute at Los Banos in the Philippines. Scientists then, had
developed HY\/ rice seeds suitable for tl~e tropics by crossbreeding
traditional tropical varieties with -tigh yielding but disease-prone Taiwanese
1. Only mcllcd rice is importad, but the amounts slated are in paddy equivalents.
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seeds. Because the new varieties have stiff stems, they can absorb more
fertilizer and water to produce a heavy seed without falling over as
traditional varieties often do when heavily fertilized. The HYVs also leave
shorter growing seasons, making possible mo~G double cropl. ing.
8. HYV seeds were incorporated into the agricultural reform program
started in 1963 under former ?';asident Macapagai. A major goal of that
program, as subsequently enlarged by President Marcos, was to convert
tenant farmers to leaseholders. About 45% of all rice farmers were tenants
in the early 1960s. It was hoped the change would help boost rice
production. since a leaseholder, guaranteed control of his farm for a specific
time, is more likely to improve his land than a tenant who could be forced
off his land at any time. Apart from improving land tenure arrangements,
the government promised increased credit, more fertilizer, and expanded
extension services to guide farmers in using the new rice seeds. The
government's plan to increase appreciably the area under irrigation was
critical, since a controlled water supply and heavy fertilizer use are essential
for optimum HYV yields.
Achievements, 1968-70
9. Among Asian rice producers, the Philippines achieved the most
rapid and widest dissemination, of HYV seeds. By 1970, 42% of its rice
acreage was planted to such seeds (see Figure 2), compared with 12% at
most among other major producers. Moreover, some 60% of the Philippines'
irrigated rice aria was sown with HYVs, and the share for the lowland
rain-fed acreage rose to about one-third. The results were substantial. After
stag~rtating near 4 million tons annually during 1962-67,12) rice output
jumF~ed by about 20% t~ an annual average o: more than 4.7 million tons~3~
2. Production data are for crop year ending on 30 Jure of the year stated.
3. Philippine rice production statistics are of questionable reliability, and rice
consumption and stocks can only be inferred from tl-e production data. Estimating
production is difficult for Manila because rice is grown mainly on numerous small plots
scattered throughout the country. In addition, as with other official Philippine statistics,
there is the suspicion of data manipulation for political purposes. For example, rice
production estimates by the Philippine Rice and Corn Production Coordi~iating Council
for 1968 and 1969 are some 10% to 15% higher than those of the Bureau of Agriculture
Economics, which constitute the official series. Moreover, there are inconsistencies
between estimates for production, yields, area planted, consumption, and changes in
stocks. Thaw discrepancies are indicated by the Food and Agriculture Organization in
its 1971 report, Introduction and Effects of High-Yielding Varieties of Rice in the
Philippines.
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Percentage of Rice Lands Planted to Wigh Yielding Variety Seeds
Million Acres
Hurmo 12.7
Philippines 7.9
during 1968-70 (see Table 2). The exact gain in 1970 is unknown, l~r.owever,
because of a change in statistical estimating procedures that raised reported
output. Because the earlier data were not adjusted apward, there is a discrete
jump in 1970 in the Philippine rice production series.
10. Increased rice output seems to have come almost entirely from
higher yields. Altl'lough one Philippine agricultural agency reported an
increase of 10?Io in rice acreage, another indicated a decline by a like
percentage. The change in acreage was probably small since there is no
~svidence of a significant shift between ripe and other crops and it is highly
unlikely that marginal land would be brought into production to plant HYV
seeds. Almost all the rise in yields probably resulted from the increased
use o` HYVs combined with a much greater use of fertilizer, increased
double cropping, :lnd an increase in the area irrigated. The 25% expansion
of the area irrigated between 1967 and 1970 alone could have accounted
for about one-third of the rise in output. At the sane time the use of
HYVs allowed the ,~luiticropped land to be more t~~an doubled.
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11. With increased local production, the Philippines did not import
rice between 1968 and 1970. Manila became convinced that its perennial
rice shortfall had been overcome and was beginning to worry about how
to dispose of future rice surpluses, which they expected to reach 1 million
tons by 1975. Philippine Government leaders reportedly were told of the
statistical change in reporting in 1970 but they seemed to disregard it. In
this psychological climate, the government considerably lessened its
emphasis on expanding rice production in favor of other economic activities,
including other crops and i:ldtistry. In reality, although the Philippine rice
situation had substantially improved, production still failed to match
consumption, and the appearance of self-sufficiency was achieved only by
sharply drawing down domestic rice stocks to very low levels.
Problems, 1971-72
12. Following a jump in 1970, rice production rose again in 1971,
but only slightly; and fell marginally in 1972. Witli consumption continuing
to rise and with stocks low, imports grew sharply. In calendar year 1971
they were some 670,000 tons -the second Highest in the country's
history -and Manila expects imports in 1972 to top 770,000 tons and
perhaps exceed the 1965 record. For a time at least, the Philippines has
again become one of the world's leading rice importers.
13. Manila claims that the primary reasons for the production
difficulties since 1970 were political disturbances in Mindanao (a leading
rice grov, Ong area -see Figure 3), the worst typhoons in several years, and
increased incidence of tungro, a disease affecting rice. No doubt these
factors, especially tungro, hampered production, but other conditions
probably had an even larger impact.
14. A basic reason for th? leveling off of rice output is the difficulty
of i;~creasing yields beyond the initial spurt. When HYVs are first
introduced, a rise in yields is fairly easy to achieve by planting on the
best irrigated lands and applying more fertilizer. While additional and
considerably higher gains are still technically possible, a much more
painstaking effort is now needed. Even approaching optimum yields requires
the meticulous management of the proper combination of water, seeds,
fertilizer, and labor. It takes years and a sustained program to transfer this
knowledge to large numbers of farmers tilling small plots and for the farmers
to accumulate experience in the proper methods.
15. The amount of land planted to HYVs rose in 1971, but the
increases were slower than in 1968-70. While many farmers planted HYV
seeds for the first time, some farmers returned to traditional varieties. They
found that the "miracle" seeds did not perform as advertised, which in
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Philippines: Rice Growing Areas
Areas Alloctod
By 1972 Floods
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some cases was attributable to the failure of farm; to adopt new tee:~.niques
fully. Also, the reversion occurred because the new seeds are prone to the
tungro disease and because consumers were dissatisfied with the taste of
the hybrid rice. New HYVs have overcome some of these problems, but
many farmers are hesitant to use them because of the difficulties they had
witli the first generation. Yields on land newly planted to I-IYV seeds,
moreover, were probably relati; ely low because the best irrigated land was
already in use.
Government Policy
16. Just at the time that greater efforts vy the Philippine Government
were needed to maintain momentum, Manila became r.:uch more involved
with other problems. In early 1970, Manila, believing its rice problem solved,
eased its promotional efforts. The Marcos government also was increasingly
preocc~ipied with a severe balance-of-payments problem. The means it chose
t~ solve this problem hurt the farmer more than other segments of the
economy, largely because of the political clout of urban group.
17. Manila's application of credit restraints to hold down imports in
1970 hit agriculture especially hard. During 1970-71, agricultural credit grew
much slower than non-agricultural credit, vheteas, during the previous
decade both had increased at about the same rate. From 1962 to 1969,
loans from commercial and semi-government financial institutions to
agriculture increased 16.5% anmially, thanks to government encouragement.
With the tighter monetary situation, agricultural credit growth slowed to
6.5% annually during 1970-71 and there was a decline in real terms as
wholesale prices increased 17.5% annually. Although a consistent series on
loans to rice growers is not available, fragmentary information suggests that
the volume has actually fallen since 1969.
18. Manila's attempts to reduce the balance-of-payments deficit
worked against the rice farmer in other ways. The 1970 peso devaluation
raised import prices by nearly 75%. Since half the country's fertilizer sapply
comes from overseas, prices of this important input rose ~!~arply and were
largely responsible for reduced fertilizer use on rice acreage in 1970-71.
19. Altogether, while only rough approximations .:an be made because
of limited data, the prices the farmer pays for his goods in recent years
have climbed more rapidly than the price he receives for rice. Retail rice
prices have spiraled, especially in 1971, because of growing shortages, but
non-agricultural wholesale prices have risen eve~- faster. Moreover, mach of
the benefit from the increase in retail rice prices has apparently gone to
middlemen and landowners rather than to farmers. This results from the
rice farmers' inability to finance substantial stocks and their lirr~ited direct
access to urban markets.
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20. The land reform program designed to turn tenant farmers into
l:aseholders has not gone well. Since the early 1960s, the number of tenant
farmers as a percentage of all farmers has been reduced from 45% to 35%.
In part this reflects the resistance of landowners combined with the
reluctance of some tenants to break with tradi~?onal ways. In recent years,
however, the slow progress also reflects the government's unwillingness to
devote the necessary funds to carry out a meaningful land reform program.
Meanwhile, Manila, for political reasons, has moved to prevent the most
efficient and most profitable use of HYV. Some landowners with large and
well-irrigated land were evicting their tenants because they could profit more
by planting HYVs on a coordinated large-scale basis with hired labor rather
than by using the traditional tenant system. Manila, worried about the
political repercussions of a mass migration from the rural areas to the cities,
passed laws that made it very difficult far landowners to evict tenants.
The Impact of the Recent Flood
21. The Philippine rice problem has been compounded by the recent
floods, the worst in modern times. Central Luzon, one of the country's
major rice producing regions, ;vas par?icularly hard hit. The floods came
at an early stage of the crop cycle, and farmers can still replant. This delay,
however, will push the harvest into the dry season and thus may reduce
yields somewhat. In addition to making up production losses, higher imports
will be required to replace rice stocks destroyed by the floods.
Prospects
22. Philippine rice production could increase substantially over the
next five years. Yields from HYV seeds, as well as overall rice yields, are
still low by international standards. A major production breakthrough,
however, would need substantial government support for a continuous and
intensive effort to improve farming techniques, more low-cost loans, and
Beater profit incentives for the farmer. The need to raise rice yields will
even become greater if Manila implements its ambitious plans to increase
feedgrain output (corn, sorghum, and soybeans) during the next few years.
With overall crop a~.eage expected to rise only slowly, land, available for
rice production could decline.
23. Although the potential for higher rice yields exists, the supply
of the necessary physical inputs, especially irrigated land, will limit the
possible improvement. While sufficient amounts of fertilizers and insecticides
can be purchased from foreign suppliers quickly, developing water systems
takes considerable time. Manila is planning to bring an additional 700,000
acres under irriga:ir~^, but the bulk of this will not be available until at
least 1975, when the Upper Pampanga project is scheduled to be completed.
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Some 60?!0 of current irrigated rice lands are planted with HYV, and,
although that still leaves room for considerable extension, much of the
remaining irrigated land is of poor quality because of silted channels and
ditches, ineffective gates, and poorly maintained pumps. Only about 8,000
acres are planned to be rebuilt anmaally through 1975, and even this modest
goal may not be achieved. Only slightly more than 1,000 acres a year were
rehabilitated during 1970-71, compared with a plan of about 4,000 acres.
Moreover, the recent floods caused damage to the irrigation system that
will take years to overcome. Consequently, unless Manila steps up its efforts
to better the use of its present irrigation, including providing more credits
for pumping equipment, rice output will rise only slowly until a ~ least the
mid-1970s.
24. In any case, Manila is likely to fall far short of committing the
necessary resources to achieve sustained self-sufficiency in rice production.
Some additional spending and greater loans to rice farmers will likely be
forthcoming but will be limited by balance-of-payments problems and the
farmers lack of politi ;al clout. Manila is unlikely to provide adequate
financial assistance and incentives to the farmers at the expense of other
sectors because it has little to gain politically and possibly much to lose.
While rural unrest is minimal, rapidly rising rice prices are a cause of great
concern. Therefore, from a political point of view, Manila is taking the
most rational course by importing cheap rice. Since most imported ric:~
now is being obtained on highly favorable credit terms, these purchases
have little immediate impact on the Philippines' foreign exchange position.
25. Altogether, sustained self-sufficiency is many years off. At best,
the Philippines could reach this position by 1975 with an average annual
increase in production of 7%,~4~ or at about the record growth level achieved
between 1968 and 1970. The availablility of water from the large Upper
Pampanga irrigation scheme after 1975 would help in maintaining
self-sufficiency through the late 1970s. But the chances are that the average
annual increase during the next few ,years will be closer to the 3.5%
consumption growth rate that would still be good by historical standards.
Under these circumstances, the annual average domestic deficiency would
be around 600,000 tons.
4. A 7% average annual increase in rice production during 1973-75 would require
planting all irrigated rice lands to HYV by 1975, a 10% annual increase in yields on
irrigated rice lands already planted to HYV, and a 2% annual increase in yields on
non-irrigated rice lands.
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