Logistics
FIRST PERSON - Alex Magno (The Philippine Star) - June 27, 2020 - 12:00am

Among the most heartening things that happened during the period of strict lockdown were private citizens taking it upon themselves to buy produce from farmers cut off from the market. The produce was brought to the city and made available to consumers through community networks based largely on the use of social media.

This spontaneous citizen response prevented produce from going to waste, helped farmers recover their costs and ensured ample food flows to the metropolitan area. The wonder of it all is that the food stocks reached final consumers at even lower prices than before.

Recall that during the first weeks of the Luzon-wide lockdown, the authorities did not seem adequately prepared to ensure free movement of food stocks. The quarantine checkpoints and the arbitrary borders set up by some local governments nearly amounted to a food blockade that could have starved the metropolitan area while forcing the farmers to misery.

We are not sure how much food was rescued and distributed by citizens transporting them on the back of pick-up trucks and the boots of cars. The Department of Agriculture, large conglomerates like San Miguel Corp. and even the military helped in the effort to bring food through the unintended blockades set up for quarantine purposes.

What the phenomenon did illustrate was the vulnerability of our logistics system.

In ordinary times, our logistics system linking farms to consumers was inefficient to begin with. It resulted in very high spillage and spoilage of farm produce. The losses in spillage and spoilage translate into higher food costs.

This is the reason why the country has among the highest food costs in the region.  The high food cost regime is a major factor explaining poverty and hunger rates. A more efficient food logistics system will bring down both rates.

The weakest aspect of our food logistics system is the inadequacy of our “cold chain.” There are not enough refrigerated warehouses and trucks to bring down the spoilage rates for fish, vegetables and fruits.

Also, we insist on storing grains in sacks rather than in silos where humidity could be controlled. So much of our rice stocks rot in improperly ventilated warehouses.

As we struggle to find our way to a “new normal,” we need to review the efficiency and reliability of our food logistics system. Should economic conditions be made more severe by this pandemic, we need to ensure our people’s food security.

Urea

New hybrid rice varieties deliver a higher yield per unit of land. But these varieties are dependent on the use of fertilizers.

To ensure food security, and as part of government’s economic stimulus effort, the Department of Agriculture (DA) is subsidizing urea fertilizer for rice farmers. The fertilizer subsidy program is called Ahon Lahat, Pagkaing Sapat Kontra COVID-19 (ALPAS sa COVID-19). It has a budget allocation of P5.69 billion to purchase urea fertilizer at between P990 and P995 per 50-kilo bag.

Of the total allocation, P1.8 billion was contracted out recently. The fertilizer purchased is intended for Central Luzon, Calabarzon, Western Visayas and Central Visayas.

A spokesman for the DA claims the centralized bidding process used for this program succeeded in bringing fertilizer prices to under P1000 per bag by going straight to the importers and bypassing the middlemen. In June 2019, the prevailing market price for the farm input was P1,139. Last February, prices for the input was at P1,051.

Not everybody agrees however that the contracted purchase price of just under P1,000 is just.

The militant party-list groups in the Lower House have filed a resolution calling for a congressional investigation into the contracts. They claim the fertilizers are overpriced by as much as P150 per bag, citing currently prevailing prices in several areas. The price variance between P1.8 billion contracts awarded to La Filipina Uy Gongco Corp. and Atlas Fertilizer and prevailing prices could translate into hundreds of thousands more bags of fertilizer made available to the farmers.

Samahang Industriya ng Agricultura (SINAG) chairman Rosendo So appears to agree with claims the fertilizer was overpriced. By going straight to the importer, cutting off the distributor and dealers, So believes that DA could have negotiated for a much lower price.

What makes the purchase even more suspicious is that a potential bidder who offered the commodity at P850 was disqualified on the grounds the company did not have the stocks on hand. No proof has been offered indicating the winning bidders had the stocks immediately available.

The DA insists the fertilizer deal is aboveboard and that no disadvantage to government was incurred. But there is so much history of anomaly related to publicly subsidized fertilizer purchases to simply take this claim at face value.

A House hearing on the matter will help shed light on the competing claims regarding this deal. Senator Cynthia Villar has likewise taken note of the competing claims and will likely conduct an inquiry at the Senate.

We hope the hearings being called on the matter will bring light and not just partisan heat to the issue. There are billions more allocated for the fertilizer subsidy program. The public will want assurance the large budget allocations are not spent recklessly.

Allegations of overpricing are particularly sensitive at this time. As we struggle to defeat a pandemic, we have scarce resources available to ensure our people’s food security. Our people will want assurance these scarce resources are deployed with great prudence.

Too often in the past, the generous subsidies government extended to our farmers proved too attractive to the greedy and the corrupt.

LOGISTICS
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