Fertilizers and fertilizer policies in Philippine agricultural development

Fertilizers have become an important source of yield and production growth in the Philippines as well as in many other developing countries of Asia and Africa during the last three decades. In the Philippines, expanded usage of fertilizer has contributed about one-third of the total growth in rice production between the mid-1960s and early 1980s. This contribution is high relative to those in other monsoon, developing countries of Asia. Fertilizer policies have played an important role in the development of the fertilizer sector. Generally, over the last three decades, these policies have taken the dual, often times conflicting, objectives of providing low-priced fertilizer to farmers and adequate incentives to local fertilizer manufacturers. To achieve these goals, instruments of fertilizer policies have taken various forms including the regulation of imports, domestic distribution, and domestic prices. In particular, fertilizer subsidies, both direct (cash) and indirect (fiscal incentives to domestic producers and importers), have become a common instrument to effect fertilizer and agricultural policy objectives. While these policies have indeed conferred protection to the latter, the farmers and the general public have borne the brunt of protectionist fertilizer policies. These policies have made the farmers' buying price of fertilizer higher and their net farm incomes from crop production lower than what they would otherwise be. Fertilizer price policies, when used alone, would have limited effects on farm incomes. But when these policies are used in conjuntion with other policies, particularly the provision of agricultural support services (research and extension, access to credit, marketing information) and rural infrastructure (irrigation, rural and inter-island transport), the effects of changes in fertilizer price policies can be much larger. That is the provision of these complementary inputs allows for both an outward shift of the demand for fertilizer and downward movement along the new demand curve