Weak Peso Delays Philippine Fertilizer Orders as Import Costs Overrun Procurement Budgets
Key Takeaways
- •The Philippines' Department of Agriculture has deferred or rescheduled fertilizer procurement because peso depreciation pushed import costs beyond the budgets originally approved for the contracts.
- •Fertilizer prices cited by the DA rose from roughly P1,500 to P2,800 or P2,900, forcing the agency to revise its procurement budget.
- •Delays in fertilizer deliveries may reduce the support the DA can extend to farmers and fisherfolk who are already dealing with weather-related production losses.
- •Imported rice is set to become more expensive, with higher costs affecting November private-sector shipments as they move into retail networks.
- •El Niño-related palay losses are estimated at 900,000 to one million metric tons, and total rice imports could soon pass 5 million metric tons after reaching 4.36 MMT as of Oct. 22.
The Philippines' Department of Agriculture (DA) said fertilizer orders have been disrupted after the weak peso drove up import prices, forcing the agency to revisit its procurement budget. Since fertilizer and rice are purchased on international markets priced in foreign currency, a depreciating peso raises their cost in peso terms, squeezing government procurement and private import programs alike.
At a briefing, DA Assistant Secretary Arnel B. de Mesa said procurement had to be deferred or rescheduled because the previously approved budget for the contracts no longer covered actual costs.
"Our fertilizer procurement is either deferred or rescheduled because the previous approved budget for the contract got changed due to the cost of fertilizer," he said. "What was once P1,500 is now P2,800 or P2,900."
Fertilizer is a key component of the DA's relief packages for farmers and fisherfolk, alongside seeds and subsidized fuel. As a core input for growing rice and other crops, delays in its procurement directly affect the support the agency can extend to producers already contending with weather-related production losses.
The currency pressure also extends to rice. Mr. de Mesa said imported rice, which is shipped in by the private sector, is set to become more expensive, affecting November shipments as they move into retail networks. The Philippines is one of the world's largest rice importers and relies on foreign supply to bridge shortfalls in domestic output.
More rice imports are expected in the coming weeks to compensate for lower domestic production caused by El Niño, the weather pattern that typically brings drier conditions and reduced harvests in the country.
Mr. de Mesa estimated that losses to palay — unmilled rice — production would total around 900,000 to one million metric tons (MMT).
He added that the Philippines might soon breach 5 MMT in rice imports. Import volumes had reached 4.36 MMT as of Oct. 22, leaving roughly 640,000 metric tons of arrivals before the 5 MMT mark is crossed. How quickly the DA adjusts its procurement budget, and whether import arrivals push the total past that threshold in the coming weeks, are the near-term data points to watch.
Reported by Maria Mikaela H. Tormon for BusinessWorld Online.
