On corporate farming, fossil fuels, and food security

Last Thursday, June 25, I attended the BusinessWorld Insight forum with the theme, “Growing Food Security Through Agribusiness,” held at Chardonnay by Astoria in Pasig City. It was hosted by the articulate broadcaster and News Editor of Cignal TV, Regina Lay.

The Keynote Address was given by Dr. Lionel Dabbadie, Philippine Representative of the UN Food and Agriculture Organization (FAO). In Panel 1, “Strengthening Farm to Market Systems,” the speakers were Undersecretary Mary Jean Pacheco of the Department of Trade and Industry’s Supply Chain and Logistics Group, Dr. William Dar of the ASEAN Business Advisory Council, and Danilo Fausto of the Philippine Chamber of Agriculture and Food, Inc.

Ms. Pacheco emphasized the role of efficient supply chains, from the farmers to wholesalers, retailers and the consumers, in bringing down logistics cost. Mr. Dar mentioned the need for farm consolidation for efficient farming, processing, manufacturing, and marketing. Mr. Fausto mentioned the problem of our archipelagic geography, so there is a need to connect the major islands, and the problem of more land conversion to non-agricultural uses.

Panel 2 was about “Financing Agriculture” and the speakers were Emmalyn Guinto of the Agricultural Credit Policy Council, and the Presidents and CEOs of three companies: Juan Victor Hernandez of Metro Pacific Agro Ventures, Henry James Sison of Agro-DigitalPH, and Michael Melendres of OrganicOptions, Inc.

I was surprised that the event sponsor, Aboitiz Foods, had no speaker, even in the panel discussions. They have several products and brands from Pilmico (feeds, flour, farms) to Diasham, Abaqa International, etc.

I checked the latest edition of BusinessWorld Top 1000 Corporations, and saw that few companies in agriculture and fisheries land in the top 1,000. But when you count the companies engaged in the manufacturing of agri-related products, the number goes up.

The largest firms in agribusiness — food manufacturing not included — are San Miguel Foods followed by a Thai company Charoen Pokphand and the Tagum Agri Dev’t Co., Inc. or TADECO (see Table 1).

Farming should be considered a regular business and not an extension of government social welfare where taxpayers-funded freebies and bureaucracy abound. The efficient players will emerge, and consumers will benefit.

Corporate farming and agribusiness can play a very important role in modernizing Philippines agriculture, raising its productivity per hectare of land while reducing costs, waste, and crop damage. The use of more machines — for tilling, planting, irrigating, spraying, harvesting, threshing, drying, processing, etc. — will greatly raise labor productivity in agriculture. Those machines use diesel or gasoline to run.

Biotech and science-based farming use inorganic fertilizers, especially nitrogen, sulfur, and ammonia, for quick uptake by crops, to increase potential harvests, shorten the cropping season, and reduce exposure to pests.

These fertilizer ingredients and other inputs are the byproducts of oil-gas refining processes, not from solar-wind or other renewable energy sources.

The Middle East war has led to increases in the prices of fertilizer products. See these reports in BusinessWorld this year: “Impact of fertilizer crisis seen reflected in food prices by Q3” (April 14), “Iran war fertilizer squeeze could spell trouble for next year’s grain harvests” (April 27), “Lawmakers pushed to diversify fertilizer supply amid China reliance” (May 28), “High fertilizer prices could persist — BMI” (June 28). Also see previous pieces from this column: “‘Trumpflation’ in energy and fertilizer products” (June 11) and “On agriculture, fossil fuels, and modernization” (June 16).

I checked the peak prices per month of fertilizer products and ingredients — ammonia, diammonium phosphate (DAP), and urea prices have not doubled from their pre-war February prices, but that of sulfur has nearly tripled early this month (see Table 2).

The use of greenhouse structures for hydroponics or multi-layer planting, and to protect crops from heavy rain or from cloudless direct sunlight, can be costly initially. Corporations can obtain easier loans than individual farmer borrowers. In some greenhouse farms in other countries, they inject CO2 into the atmosphere in the structures to raise its level from 400 parts per million (ppm) to 600 or 800 ppm or more depending on crops. CO2 serves as a plant food and fertilizer, and more CO2 means more plant growth, more food production.

So modern agriculture needs more machines that use oil to run. Fast growing and high yield crops need inorganic fertilizers that come from oil and gas production. Plants and crops need more CO2 to hasten their growth and produce better yields. The cement in farm to market roads and other structures use coal to process and “cook” the limestone, clay, and supplementary materials like coal ash used in its production.

Thus, hydrocarbons and fossil fuels — oil, gas, coal — are necessities in modern farming and for ensuring food security. The agriculture sector (and transportation, energy, industrial-manufacturing, etc.) should not embrace the anti-fossil fuels/anti-CO2 narratives and lobbying as these are anti-agriculture modernization and innovation.

The sector should instead call for the removal of the oil excise tax, for farm consolidation and corporate farming. Del Monte Corp.’s pineapple farming in Mindanao is a good model. The company does not own the land, they just lease the land from farmer landowners and employ some of them, so the farmers have double income while pineapple farming is optimized for a high revenue-earning project.

Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers. He is an international fellow of the Tholos Foundation.

minimalgovernment@gmail.com