Thesis Abstract

             ABSTRACT 

This is a comprehensive study of the impacts of research and development in Philippine rice production. I examined the sources of rice production growth in the Philippines from 1996 to 2007 by estimating a translog production function using a generalized instrumental variable estimator. Using a production framework, I analyzed the contributions of conventional and non-conventional inputs, and residual total factor productivity to the production growth. Higher output growth was observed during wet and dry seasons of 2001-2006 and 2002-2007 compared to that of 1996-2001 and 1997-2002. Results indicate that non-conventional inputs such as irrigation, adoption of hybrid and third generation modern inbred varieties, attendance at rice production training sessions, use of high quality seed, and machine ownership were the main sources of production growth in these periods. Using a cost framework, I measured the contributions of public investments in R&D, extension, production subsidy, and irrigation in reducing the cost of rice production in the  Philippines. I used the shadow share as a measure of marginal return to public investments in determining the need for further investments. I also decomposed the growth in total factor productivity of rice into scale economy, improvement in capacity utilization due to public investments, and rate of technical change. Results indicate that R&D has generated cost-savings and has improved productivity of rice. This implies that further investment in rice R&D is essential. I also found that investment in production subsidy is counterproductive which supports its phase-out. I also found inefficiencies in extension and irrigation investments. This suggests that reforms in the current extension system and a reorientation of the irrigation development strategies should be implemented in order to reap the potential benefits from these investments. Finally, I used the CERES-Rice simulation model of the Decision Support System for Agrotechnology Transfer in investigating the nature of shift in individual rice supply when a hybrid rice variety was adopted. Using the DSSAT model, I determined the yield responses of hybrid and inbred rice varieties to different levels of nitrogen, potassium, and water applications. I estimated hybrid and inbred yield response functions using the DSSATgenerated yield data. Using the estimated coefficients, I recovered the profit-maximizing demands for nitrogen, potassium and water. Then, I derived the supply functions of hybrid and inbred rice by substituting these profit-maximizing demands back to the yield response functions. Results show that adopting the hybrid rice variety would lead to a pivotal and divergent shift in the individual supply. While far from being used in an aggregate scale, the method presented is a step toward a better measurement of benefits from adopting a specific technology and returns to R&D in general.  

Thesis Overview

INTRODUCTION

 “Rice is very important to our lives. We eat rice three times a day. Even my favorite dessert is made from rice… We are lucky. We have plenty of rice to eat. My teacher said that there are too many people in Asia. Some of them do not have enough to eat… When there are lots of rice my parents are happy. Last year, when the harvest was not good, my father almost had to sell the farm to get money. Some people from the city came to our village last year. They wanted to buy the farms and make them into a golf course… Sometimes my mother looks scared. Something is happening to our rice fields that no one understands. She says that each year they have to put more fertilizer on the field to grow the same amount of rice. But the price of rice stays the same, so we get less money. My father says that he cannot tell anymore when the rains will come. Sometimes they don’t. Then there is no rice crop. We are all sad because then we don’t have much money and my father tries to find work so that he has money to buy rice and to send us to school. My father and mother want me to study hard so that when I grow up I can be a teacher or a doctor. They don’t want me to be a rice farmer.” 

                      Issa Sanchez1

Similar to Issa and her family’s circumstances, rice means life to millions of Filipinos. For them, rice is not merely a food but a grain that shapes their way of living, their hopes, and their dreams. They consider rice as a symbol of their quest for life’s security and emancipation from hunger. Thus, achieving rice security is intricately related to the nation’s struggle in eliminating extreme hunger and poverty – the United Nation’s first Millennium Development Goal. In fact, rice security is tantamount to food security in the Philippines. As the staple food of the Filipinos, rice accounts for 46% and 35% of their caloric intake and protein consumption (FAO 2008). As a major part of food spending, rice comprised 16% of the total expenditures of the poorest 30% of the population (World Bank 2007). Thus, a rise in rice prices could significantly raise the Filipinos’ cost of living sending more people to poverty. Rice is also the most extensively grown crop in the country, planted in about 30% of the total agricultural area harvested (Dawe 2003). For two million families, rice farming is the source of over half of the household income. In addition, millions of landless farm workers, and tens of thousands of merchants indirectly depend on rice for a living. Given the weight of rice’s social and economic ramifications, rice has always been the principal focus of the government’s food security policies. Philippine rice production tripled from 5 million tons in 1970 to more than 16 million tons in 2008, with only a 44% increase in the area harvested. Instrumental to this development is the use of the Green Revolution’s seed-fertilizer technology and access to irrigation facilities, which doubled the yield per hectare in the same period. Production gains fed the rapidly growing population and its increasing per-capita rice consumption. Except for a few years in the late 1970s and early 1980s, rice imports were used to fill the gap between demand and supply and to stabilize the domestic price of rice. Although the Philippines has relied increasingly on rice imports since the 1990s, its quest for the rice self-sufficiency has persisted. In constant debate, academicians, scientists, economists, and politicians argue for and against attaining rice self-sufficiency. Some say that the Philippines’ lack of comparative advantage in producing rice can be attributed to its geography (Dawe 2006). Others say that public investments required to achieve rice self- sufficiency are too costly given the competing use of scarce public resources. On the other hand, there are those who believe that self-sufficiency is justified by the thin world rice market. Since rice is mostly consumed in countries where it is produced, world supply is vulnerable to changes in the consumption and production dynamics of major producing countries. Thus, it is more practical to source rice from domestic production to avoid severe fluctuations in the world supply of rice and its price. To illustrate the political importance of self-sufficiency in rice, during the 2008 surge in the price of grains, the Philippine government enacted an open-tender policy to avoid a rice shortage while some rice exporting countries banned their rice exports.

But beyond the issue of rice self-sufficiency, expanding domestic production is essential in ensuring the availability of supply for the ever-increasing population. Improving rice productivity can contribute in reducing poverty in the rural areas because it can increase the income of small farmers and landless farm workers, specifically, who depend on rice production for a living. In addition, productivity improvement can make local producers cost-competitive with international producers, which is necessary if the country is to liberalize its rice trade. Unfortunately, several factors threaten the future of Philippine rice production. Urbanization, industrial land-use, and competing agricultural uses have decreased the physical area devoted to rice production. From 3.4 million hectares in 1991, the actual rice area declined to 2.8 million hectares in 2001. Furthermore, the declining quality of land and water resources aggravates the diminishing quantity of physical resources as a result of years of mono-cropping practices (Cassman and Pingali 1995; Flinn and De Datta 1984).

Evidence of declining productivity abounds. On the scientific front, the yield potential of indica-inbred rice cultivars has stagnated at 9 to 10 metric tons per hectare (Peng, et al. 1999; Tiongco and Dawe 2002). The average actual farm yields are only about half of the experiment station yields (Sebastian, Bordey and Alpuerto 2006). Some studies also show a decline in rice total factor productivity (TFP) in the late 1980s (Umetsu, Lekprichakul and Chakravorty 2003) and through the 1990s (Estudillo and Otsuka 2006). Fortunately, rice research and development (R&D) holds the promise of mitigating, if not countering, the impacts of these challenges. While the Philippines is already benefiting from technological innovations, efforts are continuously made to apply science in rice production. 

1.1. Developments in Rice R&D in the Philippines 

The investment in rice R&D is one of the key policies used by the Philippine government to pursue its rice security objective. According to Flores-Moya, Evenson and Hayami (1978), the history of rice R&D in the Philippines can be divided into three periods. R&D during the pre-World War II period was based on a nonsystematic research conducted by scientists of the Bureau of Plant Industry and the University of the Philippines College of Agriculture (now University of the Philippines Los Baños). The second period (1955-1960) began with the establishment of the Rice and Corn Production Coordinating Council which launched the Rice and Corn Research and Production Program, guaranteeing financial support for rice research. Rice breeding research based on selecting pure lines characterized this period. The third period is marked by the establishment of the International Rice Research Institute (IRRI), the oldest and largest international agricultural research institute in Asia (IRRI 2007). IRRI served as the model institute for research centers that make up the Consultative Group on the International Agricultural Research (CGIAR). In 1966, the major breakthrough in rice research was the release of IR8, the first inbred rice modern variety (MV) that started the Green Revolution in the tropics.2 From 1990 to the present, IRRI has bred 47 rice varieties, which was released for commercial use by the Philippine Seed Board (PSB), later named as the National Seed Industry Council (NSIC).3 Of these varieties, 29 are for irrigated lowlands, 4 are for rainfed lowlands, 5 are for cool elevated lands, 6 are for saline prone lowlands, and 3 for upland areas. Four of the varieties released for irrigated lowland are also hybrid cultivars. Since the 1990s, more than 90% of the rice area harvested in the Philippines has been planted with inbred MVs.

Beyond these three periods came two more significant developments in the Philippine rice R&D history. One was the creation in 1985 of the Philippine Rice Research Institute (PhilRice), a government-owned and -controlled research center. PhilRice was established to develop technologies and innovations that address specific production problems in the Philippines. PhilRice has also adapted IRRI’s technologies to local conditions to promote wider adoption. Since its inception, PhilRice has helped in the development of 57 rice varieties, some through its own breeding efforts, but mostly by conducting location adaptation trials. PhilRice has also developed several crop management practices and machine designs that are suited to Philippine rice production conditions. The advent of hybrid rice technology marked the latest development in the rice R&D history of the Philippines. Hybrid rice technology was initially introduced in 1998 but its commercialization was delayed until 2001 due to the difficulty in seed production. Given the commercial feature of hybrid rice, the private sector was enticed to invest in its R&D.4 Since 1998, 5 out of the 9 hybrid rice varieties released were developed by private seed companies. Based on experimental evidence, hybrid rice technology offered 15% to 20% higher yields compared to inbred MVs.