Economic Factors Affecting Rice Producti

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COLLEGE OF ARTS AND SCIENCES

DEPARTMENT OF ECONOMICS
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SAN BEDA COLLEGE
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ANALYSIS OF THE ECONOMIC FACTORS AFFECTING RICE PRODUCTION IN
THE PHILIPPINES
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A THESIS
PRESENTED TO THE DEPARTMENT OF ECONOMICS
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE COURSE

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ECONOMIC RESEARCH II (ECO26)
SUBMITTED BY:
PAUL JADE UY
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APRIL 2016
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ii
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ABSTRACT
NAME OF INSTITUTION: San Beda College
ADDRESS : Mendiola, Manila
TITLE OF THESIS : Analysis of the Economic Factors Affecting Rice Production in

the Philippines
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AUTHOR : Paul Jade M. Uy
DEGREE : Bachelor of Science in Economics and Public Policy
DATE OF COMPLETION: April 2016
This study sought to state the negative implications of research and the Philippines’
failure to achieve rice self-sufficiency and to counter the growing doubt. Rice in the Philippines
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is very important because rice is the staple food of Filipinos. If there would be an increase in
price of rice then there would be an increase in the cost of living of Filipinos. Achieving rice
self-sufficiency in the Philippines provides supply for the ever-increasing population, it can also
reduce our poverty, to show that we are globally competitive and many more.
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In this paper, it estimated the impact of farmers’ wages, government budget and El niño
to the annually performance of rice production of the Philippines. The time series data was used
in the study and its annual frequency spanned the period of 1987-2014. It is an interesting fact
that in 2013 rice self-sufficiency was achieved by 96% but the price surges due to high
production cost of Filipinos. Therefore the only way to reduce importation is to help rice farmers
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lower their production cost by adopting the new technologies such as rice threshers, combine iii
harvesters, transplanter and many more.
ACKNOWLEDGMENTS
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First and foremost I wish to express my greatest gratitude to the Lord without whom I am
nothing. He provides me enough strength, determination and wisdom that helped me throughout
this research. I would also like to extend my utmost gratitude to my statistical consultant, Sir
Joncy Mendoza, who unselfishly gave his most of his time just to accommodate my needs in
statistical treatments of this study even he is very busy and his countless efforts he gave and
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compassion to finish my thesis in which motivates me to be a better economist. To my thesis
adviser Sir Benjar Cataluna, for helping me during confusing moments and patiently read my
numerous drafts. To my panel who gave me inputs such as the topic of this research and many
more that have been very useful in my study. To my professors in San Beda College who gave
sufficient knowledge I need in economics. To our thesis moderator, Maam Rulina B. Viloria,
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thank you for your extending patience and understanding when dealing with our queries and
clarifications. To my block mates, 4AEC and 4BEC, thank you for answering my questions and
thank you for being there for me. Lastly to my family and girlfriend – Jing and Eddie my parents,
my siblings and Caissa my girlfriend who endured this long process with me, always offering
love and support. Thank you for understanding my busy schedule in order to finish my thesis.
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This paper would not have been possible without the help and guidance of everyone
mentioned and also to the people that I failed to mention who help me; all of this will not be
made possible. Thank you so much and God bless us all!
Table of Content
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s
ABSTRACT...........................................................................................................................II
ACKNOWLEDMENTS........................................................................................................III
CHAPTER I...........................................................................................................................1
INTRODUCTION........................................................................................................................... 1
BACKGROUND OF THE STUDY.....................................................................................................3
STATEMENT OF THE PROBLEM....................................................................................................5
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COLLEGE OF ARTS AND SCIENCES v
STATEMENT OF ASSUMPTIONS AND HYPOTHESES......................................................................5

RELEVANCE OF THE STUDY........................................................................................................7
SCOPE AND LIMITATIONS OF THE STUDY....................................................................................7
GLOSSARY OF TERMS................................................................................................................. 8
CHAPTER II........................................................................................................................10
LOCAL LITERATURE..................................................................................................................10
FOREIGN LITERATURE...............................................................................................................24
THEORETICAL FRAMEWORK..................................................................................................... 30
RESEARCH PARADIGM.............................................................................................................. 31
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CHAPTER III......................................................................................................................32
DATA REQUIREMENTS AND SOURCES.......................................................................................32
METHODS OF RESEARCH...........................................................................................................32
ECONOMETRIC MODEL............................................................................................................. 32
DIAGNOSTICS AND TEST........................................................................................................... 33
CHAPTER IV......................................................................................................................40
TREND AND GROWTH PATTERNS..............................................................................................40
ESTIMATION RESULTS...............................................................................................................44
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CHAPTER V........................................................................................................................52
SUMMARY OF THE STUDY.........................................................................................................52
SUMMARY OF FINDINGS............................................................................................................52
CONCLUSIONS........................................................................................................................... 53
RECOMMENDATIONS................................................................................................................. 54
REFERENCES.....................................................................................................................56
APPENDICES......................................................................................................................58
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CHAPTER I
OVERVIEW OF RESEARCH PROBLEM

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COLLEGE OF ARTS AND SCIENCES 2
Introduction
Rice is very important to the life of Filipinos. Rice to them is not just a food but also a
seed that harvest their lifestyle, their hopes and their dreams. They acknowledge rice as a
representation of their pursuit for life’s security and their release from hunger. So achieving rice
security is much related to the nation’s challenge in eliminating extreme hunger and poverty,
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which is the first Millennium Development Goal. The rice security is most likely same as the
food security in the Philippines. According to the World Bank 2007 rice compose 16% of the
total expenditures of the poorest 30% of the population. Rice is the leading component of food
spending. So if there would be an increase in the prices of rice there would be an increase in the
Filipinos cost of living then the more people would be in poverty.

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Rice is also the most harvested crop in the country, according to the World Bank 2007 it
is planted about 30% of the total agricultural area harvested. For two million families, rice
farming is the source of over half of the household income. There are millions of landless farm
workers and thousands of merchants depend on rice for a living. Given the importance of rice’s
economic consequence, rice should be one of the dominant focuses of the government.
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The productions of rice in the Philippines greatly increase in the year 2008 because of the
Green Revolution’s seed-fertilizer technology and it had somehow countered the continuously
increasing population of rice eaters. But unfortunately in some years the Philippines had to
import rice because of the cheaper price if the country would import and the country depended
on rice imports since the 1984, its goal for rice self-sufficiency has persisted.
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In continuous debate of economists, politicians and even ordinary people argue of
achieving rice self-sufficiency. Some are saying that the Philippines lack the comparative
advantage in producing rice. Others say that it just needs public investments but it would be
costly. Furthermore, there are still who believe that self-sufficiency could be achieved. Since rice
is consumed in countries where it is most produced, the supply of other countries may change
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through their consumption and production. So it is very practical to have our own sources of rice
to avoid severe changes in the rice supply of others and also its price. To illustrate further the
importance of self-sufficiency in rice, during the year 2008, some rice exporting countries
banned their rice exports so there may be a time that we could not import. Furthermore we could
even start to export continuously again. It can also be a solution to rice cartels, it can also counter
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our trade deficit, nonstop importing could also devalue our currency and lastly it can also show
that we are globally competitive especially the ASEAN integration will happen soon. But beyond
the issue of rice self-sufficiency, expanding domestic production is essential in ensuring the
availability of supply for the continuously increasing population. Improving rice productivity can
even reduce poverty in the rural areas due to it can increase the income of farmers and landless
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farm workers who depend on rice production for a living. But there are lots of factors
challenging the future of Philippine rice production such as urbanization, land reforms, areas for
rice production has decreased, typhoons and calamities, El niño, population, lack of government
assistance, farmers wages and the declining quality of land and water resources. So the
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Philippines must improve the rice production to supply the gap between demand and supply of
rice. Furthermore the Philippines is already benefiting from technological modernization.
Another issue why our rice security is at risk is millions of farmers are getting too old for
their back breaking work and their children are not interested for taking over due to lack of
incentive. The younger generation does not see farmer, as a decent career because farmers’
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wages is quite low compare to other rice exporting countries. In other countries, farmers are
considered entrepreneurs and businessmen. But in the Philippines, many farmers still suffer in
farming that barely provides for their families even if their contribution to the Philippine
economy is massive. There might come a time when the country will not have enough farmers to
grow and produce rice and also other crops.

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It is in this background that the study was conceptualized. The paper looked into the
Philippines performance on rice production. In the analysis if the Philippines could stop
importing or rather increase its supply of rice to meet the demands of the Filipinos or even export
rice again.
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Background of the Study
Rice is the staple food for about 80% of Filipinos, which accounts for 46% and 35% of
their caloric intake and protein consumption, respectively. Rice is the single most important
agricultural crop in the Philippines, and is therefore a major source of income for millions of
Filipino farmers (Bordey, 2010). The country rank 8th among producers of rice in the world and
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ironically, it is the world’s top rice importer as well. Rice production in the Philippines has
increased from 1.16 tons per hectare in 1960 to 3.59 tons per hectare in 2009, which is lower
than the previous two years 2007 and 2008 due to damage done by two tropical storms, namely
Ondoy and Pepeng. Typhoons, floods, and droughts caused 82.4% of the total Philippine rice
losses from 1970 to 1990 (Lansigan et al. 2000) Philippines has reached to its food self-
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sufficiency goal in 1978, however, it turned into a net importer of rice in 1984 (Umetsu et al.
2003). Achieving self-sufficiency in food grain production is a key development objective in
developing countries due to lack of foreign exchange to finance major international purchases.
Self-sufficiency in rice is the primary goal of agricultural policy in the Philippines and achieving
rice security is directly related to the nation’s struggle in eliminating extreme hunger and
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poverty. An increase in international rice prices, world food crisis in 2008, high prices of
agricultural inputs, rising population, natural disasters, increased urbanization, industrial land-
use, and decreasing land area in rice been key factors in setting the nation back in its rice-self-
sufficiency efforts (Diagne et al., 2013; Pate & Cruz, 2007; Rola, 1990; Timmer, 2010).
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The country is capable of producing up to 6,344 kilos of rice per hectare, although
Vietnam, Indonesia, and China have better production records. Vietnam produces 6,808
kilos, Indonesia 6,675 kilos, and China 6,549 kilos per hectare. But the Philippines have 43,000
square kilometers of rice fields as of year 2014. These could readily produce the nation’s rice
needs. The problem is that the Filipino farmers’ cost of production is so much higher than that
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of Vietnamese and Thai farmers, so that it is cheaper for us to import rice from these countries
than to produce it ourselves. (Manila Bulletin, 2014)
Statement of the Problem
This research sought to overstate the negative implications of research and the
Philippines’ failure to achieve rice self-sufficiency and to counter the growing doubt. The
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research provided policy makers with some fresh insights into the impacts of rice R&D based on
precise analyses of recent data if the Philippines could stop importing or rather increase its
supply of rice to meet the demands of the Filipinos and even export rice again. The research
aimed to answer the following questions:

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1. What is the performance of the rice production in the Philippines for the period of 1987-
2014?
2. What is the status of the following factors related to rice production?
2.1 Farmers wages
2.2 Government budget

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2.3 El Niño
3. How significant are the effects of farmers’ wages and government budget to the rice
production in the Philippines?
Statement of Assumptions and Hypotheses
1. Ho: Farmers’ wages have no significant effect to the rice production of the Philippines
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Ha: Farmers’ wages has significant effect to the rice production of the Philippines
2. Ho: Government budget have no significant effect to the rice production of the
Philippines
Ha: Government budget has significant effect to the rice production of the Philippines
3. Ho: El Niño have no significant effect to the rice production of the Philippines
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Ha: El Niño has significant effect to the rice production of the Philippines
4. Ho: Rice production in the Philippines exhibits a negative relationship with government
budget
Ha: Rice production in the Philippines exhibits a positive relationship with government
budget
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5. Ho: Government budget exhibits a negative relationship with farmers’ wages
Ha: Government budget exhibits a positive relationship with farmers’ wages
6. Ho: Rice production exhibits a negative relationship with farmers’ wages
Ha: Rice production exhibits a positive relationship with farmers’ wages
7. Ho: El Niño exhibits a negative relationship with farmers’ wages

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Ha: El Niño exhibits a positive relationship with farmers’ wages
8. Ho: El Niño exhibits a negative relationship with government budget
Ha: El Niño exhibits a positive relationship with government budget
9. Ho: El Niño exhibits a negative relationship with rice production
Ha: El Niño exhibits a positive relationship with rice production

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Relevance of the Study
 The study provided policy makers with some fresh insights into the impacts of rice R&D
based on precise analyses of recent data if the Philippines could stop importing or rather
increase its supply of rice to meet the demands of the Filipinos or even export rice again.
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 The study provided a comprehensive summary of the current performance of the rice
production in the Philippines.
 The study provided solutions to avoid rice shortage and expansion of domestic
production for the ever-increasing population.

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 The study provided policy makers substantial information to improve rice productivity
that can contribute to reduce poverty by reducing the price of rice and in the rural areas
because it can increase the income of farmers.

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Scope and Limitations of the Study
The course of discussion of the paper focused on the analysis if the Philippines could stop
importing or rather increase its supply of rice to meet the demands of the Filipinos or even export
rice again. The paper covers the country's historical yearly economic performance, rice
production, farmers’ wages, government budget and El Niño from the year 1987-2014.
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Additionally, the study only observed at a 28 yearly period. As what can be expected, the
practice of employing a more extensive longitudinal database may discover other significant
findings with regard to the impact of the farmers’ wages, government budget and El Niño to the
rice production of the Philippines.

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Glossary of Terms
Shipping the goods and services out of the port of a country. The
seller of such goods and services is referred to as an "exporter" and is

Export
based in the country of export whereas the overseas-based buyer is
referred to as an "importer".
Import It is a good brought into a jurisdiction, especially across a national
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border, from an external source. The party bringing in the good is
called an importer
refers to a set of research, development, and technology
Green Revolution
transfer initiatives t increased agricultural production worldwide,
particularly in the developing world

El Niño Defined by prolonged warming in the Pacific Ocean sea surface
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temperatures when compared with the average value.

The Millennium Development Goals (MDGs) are the
First Millennium eight international development goals that were established following
Development Goal the Millennium Summit of the United Nations in 2000. The first goal
is to eradicate extreme poverty and hunger
produce or provide (a natural, agricultural, or industrial product).
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Yield
The face of a season with little or no harvest. There are several
Lean month reasons for the lack of growth, but often times it comes about because
of the lull between harvest and the first plant of the following season.
R&D Research & Development consists of investigative activities that a
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business chooses to conduct with the intention of making a discovery
that can either lead to the development of new products or
procedures, or to improvement of existing products or procedures.

A collusive international association of independent enterprises
Cartel formed to monopolize production and distribution of a product or
sevice, control prices, etcetera

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Which is also referred to as net exports, is an economic condition that

Trade deficits
occurs when a country is importing more goods than it is exporting.
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CHAPTER II
REVIEW OF RELATED LITERATURE
This chapter focused on the literature and studies that are relevant to the study, the
theoretical framework and the research paradigm, which the researcher used throughout the term
of the study.
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Local Literature
To Filipinos, a meal without rice is not a meal at all. The mere absence of rice on a
Filipino family’s table can trigger a person to steal. Streets could also turn into rallying places by
the masses who demand for the availability of rice in every meal. (Philrice, 2011)
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The truth is, meeting the demand for rice has never been easy for the Philippine
government. In guaranteeing the availability of rice in every household, the government has
often resorted to importation. (Philrice, 2011)
Rice importation as a “solution”

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Although the Philippines is an agricultural country with rice as its main crop, rice
production hardly meets the demands of a burgeoning population, which increases at 2.5% each
year. (Philrice, 2011)
2011 population has reached over 90 million. The Bureau of Agricultural Statistics (BAS)
reports that last year’s harvest of 6.62 M metric ton (mt) rice would not be enough to meet the
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current demand of 10.1 million mt. One reason that hampers farmers’ efficiency in producing
more rice is the frequent occurrence of typhoons and floods in many areas. Dr. Dante B. de
Padua, the country’s pioneer in rice postproduction technology added that postproduction losses
are high (14.84%) owing to improper drying and harvesting practices. (Philrice, 2011)
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Thus, the government resorts to rice importation whenever there is an actual or projected
shortage of rice as a result of a shortfall in production. Riza Bernabe of the Philippine Peasant
Institute said, however, that aside from the need to import rice to feed all Filipinos, rice
importation becomes necessary so that consumers would have access to more affordable rice.
(Philrice, 2011)
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Rice importation as a “problem”
Danilo Ramos, secretary general of the Kilusang Magbubukid ng Pilipinas claims that
importation “aggravates the situation of the hurting rice sector” because farmers cannot compete
with cheaper and usually subsidized rice imports. (Philrice, 2011)

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However, economist Jacinto Fabiosa in his paper Programs and Politics for Rice and
Other Food Crops: Some Imperatives, pointed out that the strategic importation in June, July,
August, and September would not adversely affect all farmers because by then, there will no
longer be available rice stock as the farmers usually dispose their produce immediately after
harvest. He admitted, however, that importation adversely affects farm prices. One problem with
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rice importation is unstable price owing to unsteady supply in the global market. The unbalanced
supply makes the international market “thin” as there are a number of countries competing for
stocks. This, according to Fabiosa, poses greater risk for the county. (Philrice, 2011)
Thus, DA Secretary Proceso Alcala assured the country that there will no longer be rice
importation by 2013 under DA’s Agri-Pinoy program. Alcala told farmers, irrigators, local
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leaders and various stakeholders during the Farmers Forum In Kalinga last December, that the
Philippines will achieve rice sufficiency in three years and will stop importing rice from other
countries. (Philrice, 2011)

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Rice sufficiency under Agri-Pinoy, according to Alcala, can be achieved through a more
comprehensive program that would improve farmers’ income. Increasing the farmers’ income
opportunities will encourage them to also increase their production, he stressed. (Philrice, 2011)
Based on data derived from the Institute’s Impact Evaluation, Policy Research, and
Advocacy Program, the country needs to increase the production of paddy rice needs by 7.5
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percent for year 2011, 10 percent in 2012, and another 10 percent in 2013 to nail the country’s
moving target. (Philrice, 2011)
To compensate low area harvested per capita and to further improve yield, the
Department of Agriculture is implementing the construction, restoration and rehabilitation of
irrigation facilities; research and development; massive training of extension and farmers; and
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farm mechanization. To create a favorable market condition for producers, the government is
also enhancing the operational efficiency of the National Food Authority (NFA) for rice to have
higher market prices. Moreover, NFA is expected to gradually increase the procurement of
domestically produced paddy rice by 2013, which will increase farm gate price of paddy rice and
encourage farmers to produce more rice. (Philrice, 2011)

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Indeed, feeding more than 90 million mouths is a big challenge. These mouths should be
satisfied to ensure the Filipinos’ active participation in the development of our country. Lest we
forget, a hungry stomach feeds an angry mind. (Philrice, 2011)

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Southeast Asia is the hub of the world’s rice economy. As a region, it has been a net
exporter of rice for most of the past 110 years (the exception being some years between 1967 and
1978). [CITATION Daw10 \l 1033 ]

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It contains two of the world’s top 3 exporters, but also two countries that, from time to
time, have each been the largest rice importer in the world. Why are some countries in this
region self-sufficient in rice while others are not? (Dawe, 2015)
Rice exporters vs. importers

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Self-sufficiency is achieved when production exceeds consumption, so lower rice
consumption should give a country a head start in achieving rice self-sufficiency. Yet, people in
the traditional rice-importing countries (Indonesia, the Philippines, and Malaysia) eat less rice.
(Dawe, 2015)
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On the supply side, each exporting country in Southeast Asia (Thailand, Vietnam,
Myanmar, Cambodia, and Lao PDR) has more production per person than each of the 3 rice-
importing countries. But, surprisingly, the reason for higher per capita production in the
exporters is not higher yield. (Dawe, 2015)

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In fact, the importing countries have higher overall yield than do the exporting countries,
because a higher percentage of rice land is irrigated in the importing countries. Rather, the
exporting countries have much more rice area per person. (Dawe, 2015)
In theory, the reasons why the exporting countries might have more rice area per person
could be that their land is more suited to growing rice (as opposed to other crops), cropping
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intensity (the number of crops planted per unit of agricultural area) is greater, more land is used
for agriculture, or more land is available per person (low population density). (Dawe, 2015)
Strategy for rice importers

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Of course, some exceptions exist for both groups, but these exceptions were due to
“revolutionary” events. Should the rice-importing countries try to mimic the exporting countries
and increase the proportion of cropped area devoted to rice? (Dawe, 2015)
The problem with such a strategy is that there is a very good reason why fewer farmers
grow rice in the importing countries, namely, other crops are more profitable. Forcing farmers to
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grow rice will reduce their income, which will work against household food security. (Dawe,
2015)
Thus, rice importers face a trade-off between national self-sufficiency (which is often
equated with national food security) and household food security. The policy of restricting
imports to achieve national self-sufficiency and reduce reliance on the world market raises
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domestic prices, which reduces household food security because most of the poor have to buy
their rice in markets and are hurt by higher prices. (Dawe, 2015)
Higher domestic prices also result in other costs, such as reduced farm diversification,
poorer nutrition, and less competitiveness in other sectors of the economy. These costs should be
considered in the design of national policies. (Dawe, 2015)

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Self-sufficiency in food staples means that the country must produce the national food
requirement while also maintaining a buffer stock to be used in times of need, according to the
Philippine Rice Research Institute. [ CITATION Dan14 \l 1033 ]
The country’s area harvested to rice is very small compared to major rice producing
Asian countries, the Pinoy Rice Knowledge Bank of the Department of Agriculture (DA)
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reported. “Although we say that we are an agricultural country, we don’t have large land
resources to produce our total rice requirement.” (Danao, 2014)
The Philippines, despite being the 8th largest rice producer in 2008 (16.8 million tons),
was also the world’s top rice importer (1.8 million tons), the World Rice Statistics and the Food
and Agriculture Organization reported. (Danao, 2014)

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Table 2.1 Rice Output from Produce Palay

Palay Production (in metric Rice output (in metric
Year
tons) tons)
2010 15.77 M 9.46 M
2011 16.68 M 10 M
2012 18.03 M 11.06 M

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2013 18.44 M 11.30 M

Source:Bureau of Agricultural Statistics
For this year, DA is targeting to produce 19.32 MMT of palay or a 4% increase from
2013. With an average milling recovery of 60%, rice output is an estimated 11.59 MMT. (Danao,
2014)
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Pinoy rice consumption
Though the Philippines increased its rice production, it still wasn’t enough to provide for
our rice consumption requirement. (Danao, 2014)

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Table 2.2 Rice Consumption Per Capita

Year Kg
1990 92.53
1995 92.55
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2000 103.16
2005 110.0
2010 114.81
2012 117.14
Source: Bureau of Agricultural Statistics
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The Philippines has had a 27% increase in rice consumption since 1990. The country’s
growing rice consumption requirement is parallel to the growing population. (Danao, 2014)
“The production is increasing historically and generally because before we didn’t raise
hybrid rice. Hybrid seeds only began in 2005. But in 1998, there was an El Niño, so production
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dropped. In 2009, there was Typhoon Ondoy (Ketsana) so production was also low,” Jacinta
Estrada, Bureau of Agricultural Statistics (BAS) statistician, explained. (Danao, 2014)
With the average milling recovery going from 60% to 65%, rice produced in the country
is still almost insufficient for the growing population. (Danao, 2014)

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Table 2.3 Trend of Philippine milled rice production and the population
1970 1980 1990 2000 2010 2013
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Milled rice production

3.4 M 5.02 M 6.43 M 8.14 M 10.54 M 11.64 M
(in metric tons)*
Population
36.7 48.1 60.7 76.5 92.33 97.7
(in millions)**
Sources: United States Department of Agriculture, National Statistics Office
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The Philippines achieved rice self-sufficiency in the 1970s and even exported small
quantities of rice in the early 1980s because of the “Green Revolution” which included
improvements in irrigation, varieties, and fertilizers. (Danao, 2014)
“There were massive losses in milling because milling was inefficient. It could have still
increased 40%-45%. The percentage of loss depends on machines; infrastructure’s also a big
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factor. Most of the milling facilities now are column type, the small ones, with lots of losses,”
Tanchuling said. (Danao, 2014)
The country’s rice self-sufficiency since 1990 has been increasing, but dropped since the
early to mid-2000s. The world rice crisis in 2007 and 2008 also affected the country’s self-
sufficiency since we were one of the biggest importers. (Danao, 2014)

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The DA recently adopted a new formula for a more accurate Rice Self-Sufficiency (RSS)
ratio. With the new formula, the DA declared 98% rice self-sufficiency ratio for the year 2012.
This is the latest RSS that the Department has released so far. (Danao, 2014)
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What can be done?
“81% of the increase in area harvested from 2000-2010 was due to expansion of irrigated
areas, while 19% on non-irrigated ecosystems,” PhilRice said. 73% of the production increase
also came from irrigated areas. (Danao, 2014)

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“With the government’s target of more than P100-million worth of irrigation budget to be
given by 2016, there will be hopefully significant increase in irrigation cover,” Tanchuling
added. (Danao, 2014)

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The DA IQ 2014 Agri report stated that the Department already allotted P1.61 billion for
El Niño mitigation schemes, from which a bulk of more than P500 million will be allotted for the
provision of seeds, planting materials, and other production inputs. (Danao, 2014)
There are many ways the government could still make rice self-sufficiency a more attainable
goal for the Philippines. Tanchuling cited some suggestions:

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 Diversification: Multiple strategies to improve production and market competitiveness,
lower production cost from P11 to P7 just like in Thailand
 Subsidize service irrigation fees of farmers
 Promote community production of different types of seeds which are locally adapted to
soil and climate condition

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 System of Rice Intensification which uses less water and less seeds
 Ecological pest management to alleviate use of fertilizers and pesticides
 Better credit program for the farmers: Our credit interest is 20-40%; in other countries,
it’s only 4-5%

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 Greater insurance coverage: The 2013 budget covered only less than 10 % of the
penetration coverage
 Palay procurement: Part of the produce should be bought by the government at a higher
price
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“Milling, infrastructure, enhancing the total farmer productivity, increased budget for
agricultural research and processes, tighter measures against smuggling – these can help pave the
way towards rice self-sufficiency of the country,” Tanchuling concluded. (Danao, 2014)
Rice Sufficiency: Dangerous Dream

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The government's flagship program for agriculture is the Food Staples Sufficiency
Program (FSSP), which aims at 100% rice self-sufficiency this year. Is it attainable? The answer,
to put it bluntly, is No – unless we want to risk an unreasonably high price of rice. [ CITATION
Bri13 \l 1033 ]
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This is not to say the FSSP is poorly thought through. It is a coherent plan for meeting the
country's rice demand using only domestic production. Current and future demand is estimated
by assuming fixed per capita consumption of 119 kg per year, multiplied by the projected
population. This leads to an annual production target, which is then translated into annual targets
for area harvested and yield. (Briones and Galang, 2013)

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The core strategy to reach the production target is public investment in irrigation. FSSP
also emphasizes other interventions such as R&D, extension, and mechanization. (Briones and
Galang, 2013)
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The Department of Agriculture insists that, with enough commitment and funding, the
target is attainable. In fact its budget in 2013 is P55.3 billion, up from its 2011 budget of P33
billion. (Briones and Galang, 2013)
Ambitious Goal
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Based on historical record, however, the self-sufficiency target seems too ambitious.
According to FSSP, from 2011 to 2015, palay yield needs to rise from 3.78 to 4.53 tons per
hectare, and production from 17 million tons to 22.7 million tons per year. This implies an
annual growth of 3.8% for yield and 6.3% for production. But from 1994 to 2010, average yield
and production growth was just at 1.5% and 3.2%, respectively. (Briones and Galang, 2013)
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Since the start of the plan period in 2010, we can already observe deviations from the
target. Palay production in 2011 fell short by 2.8%. Imports were held to just 0.7 million tons in
2011 and 0.5 million tons in 2012, but this does not mean domestic production is becoming
sufficient to meet demand. (Briones and Galang, 2013)

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Consider the country's rice stocks: inventory has fallen from 3.4 million tons at the start
of 2011 (1.7 million tons of which were National Food Authority (NFA) stocks) down to 2.6
million tons by the start of 2012 (only 1.0 million tons of which were NFA stocks). (Briones and
Galang, 2013)
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Since then, the NFA has been shedding its inventory further, down to 0.5 million tons by
October 2012. Clearly imports have been replaced by drawing down stocks – an unsustainable
strategy. (Briones and Galang, 2013)
Total stocks by end-2013 may fall further to 1.5 million tons, or only 12% of domestic
demand -- below the 17% level recommended by Food and Agriculture Organization. Moreover,
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the definition of an "adequate" domestic supply is always relative to price. After all, if domestic
price of imported rice is kept artificially high then imports can be reduced, or even eliminated. In
fact, from 2011 to 2012, domestic buyers of rice paid an extra 40% on top of the world price of
rice. (Briones and Galang, 2013)

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Historical trends and recent performance do not augur well for the FSSP target. How
about the future? The Agricultural Multi-market model for Policy Evaluation (AMPLE), an
analytical tool for scenario building, can be used to answer this question. (Briones and Galang,
2013)
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Assumptions and targets of FSSP are incorporated in the reference or "most likely"
scenario. For 2013, the Reference scenario projects a harvest of 18.7 million tons, 6.5% short of
the FSSP target of 20 million tons. Imports do not decline to zero in this scenario; even by 2020,
the country imports about 2 million tons annually. (Briones and Galang, 2013)
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Imports remain high because consumption rises by about 3.4% per year -- faster than the
rate of population growth. The reason is precisely because of FSSP interventions: when the
supply of rice increases, its price falls and consumers buy more of it. The FSSP assumption of
fixed per capita consumption is untenable. The amount of palay harvest needed to eliminate and
(not just displace) imports is therefore underestimated. What eliminates imports is the direct
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approach of raising import barriers. The AMPLE scenario finds that imports can fall to zero by
2015 by doubling the trade barrier. However this causes the domestic price of rice to be higher
than under the reference scenario (by over 6%). (Briones and Galang, 2013)
Risky Policy
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Protectionism undermines food affordability, which is clearly inimical to food security. In
fact, the government has already signaled its intention to keep the rice market closed, by
applying for an extension with the World Trade Organization of its rice import
restrictions. (Briones and Galang, 2013)

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Such a closed policy is risky. In case of an unexpected domestic shortfall of rice – a
serious possibility in a calamity-prone country – quantitative restrictions invite severe price
spikes. This already happened in 1995, when the rice prices rose by nearly 50% in just 6 months.
At the start of that year, government had over-estimated the rice harvest and underestimated the
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import requirement. A repeat of this episode would be disastrous for the poor. (Briones and
Galang, 2013)
Self-sufficiency is good, but it should not be equated with zero imports. Additional
criteria need to be introduced in defining self-sufficiency. One of course is food affordability.
Another is to target domestic production towards "necessary" rice intake based on nutritional
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norms - this is likely to be lower than the 119 kg/year official figure (which in turn is based on
actual per capita consumption). (Briones and Galang, 2013)
Government should give up its dangerous dream, maintain a practical stance on rice
importation, and make sure its agriculture budget is spent on the right programs. As Secretary
Proceso Alcala says – and I cannot agree more (Briones and Galang, 2013)
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Foreign Literature
The Philippines is currently the largest importer of rice in the world, importing around
1.8 million tons of rice in 2008 (World Rice Statistics). Three main factors explain why the
Philippines imports rice: (IRRI, 2014)

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Land area: The Philippines has around 300,000 square kilometers, of which around
43,000 square kilometers of harvested area are used for rice production. As most of the country
is very mountainous and consists of many small islands, suitable land is limited to expand rice
production into without affecting wetlands, forests, or areas producing other crops. Urban areas
also continue to expand rapidly. (IRRI, 2014)

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Population growth: The population of the Philippines is estimated at 97 million. Its
annual growth rate of around 2% – among the world’s highest – means that just to keep pace
with growing demand the country would have to increase rice production and yield at rates rarely
seen in history. (IRRI, 2014)

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Infrastructure: Irrigation infrastructure is not used and maintained as efficiently as it
could be, thus reducing productivity potential. Transport infrastructure, particularly good-quality
roads, is lacking in the Philippines, which affects the transport of rice and hinders the rice trade.
(IRRI, 2014)
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The Philippines is the world’s eighth-largest rice producer. Its arable land totals 5.4
million hectares. Rice area harvested has expanded from nearly 3.8 million hectares in 1995 to
about 4.4 million hectares in 2010. However, the country’s rice area harvested is still very small
compared with that of the other major rice-producing countries in Asia. More than two-thirds
(69%) of its rice area is irrigated. The country’s production increased by a third, from 10.5
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million t in 1995 to 15.8 million t in 2010. Seventy-one percent of rice production came from
irrigated areas. Although yield improved from 2.8 t/ha in 1995 to 3.6 t/ha in 2010, it was still
way below the yield potential of modern varieties. (IRRI, 2014)
Rice is a staple food for most Filipinos across the country. The nation’s per capita rice
consumption rose from 93.2 kg per year in 1995 to 123.3 kg per year in 2009. Similarly, per
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capita caloric intake from rice rose from 917 kcal per day in 1995 to 1,213 kcal per day in 2009.
Protein requirements from rice, on average, increased from 29.7% in 1995 to 34.8% per person
per day in 2009. (IRRI, 2014)
The Philippines imports about 10% of its annual consumption requirements. In 2010 and
2011, the country was the biggest rice importer. Its rice imports amounted to 2.38 million t in
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2010, mostly coming from Vietnam and Thailand. Despite these imports, rice prices for
consumers are some of the highest in developing Asia (as are farm-gate prices for farmers). The
high prices are enforced through an import control by the National Food Authority (NFA), a
government agency, which also procures paddy from farmers at a government support price. The
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NFA is also involved in rice distribution by selling rice through the agency’s licensed and
accredited retailers/wholesalers in strategic areas at a predetermined price. (IRRI, 2014)
Although rice is the main staple in the country, it is a highly political commodity. The
Philippine rice sector has always been the center of the government’s agricultural policies. The
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focal points of the policies revolve around promoting rice self-sufficiency and providing high
income to farmers while making rice prices affordable to consumers. (GRiSP, 2010)
One of the most significant programs of the government for the rice sector is “The
Philippine rice master plan 2009-13—enhancing provincial rice self-sufficiency.” This rice
master plan envisions a 100% self-sufficient rice economy by 2013 through improved rice
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productivity, and increased income of rice farmers. This plan pursues location-specific
interventions that can help farmers achieve higher yield. It focuses on how interventions can
improve productivity toward sufficient yield. These include improvement of the effectiveness
and efficiency of irrigation systems through rehabilitation; the use of high-quality hybrid and
inbred seeds and farmers’ varieties; integrated and sustainable crop management technologies;
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the provision of soft loans for the establishment of shallow tube wells and surface water pumps;
and delivery of extension support services. Rice seed subsidy schemes for farmers were
implemented to acquire high-yielding varieties, including hybrid rice varieties. The government
also extends support for farm mechanization through its Rice Mechanization Program. It aims to
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procure and distribute postharvest (drying and milling) units and on-farm machinery through a
financing scheme wherein the government shoulders a big part of the cost. (GRiSP, 2010)
Rice Environments
The major rice-producing parts of the country are Central Luzon (18.7%), western
Visayas (11.3%), Cagayan Valley (11%), Ilocos region (9.8%), SOCCSKSARGEN (7.5%), and
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Bicol region (6.8%). SOCCSKSARGEN is a newly created region in central Mindanao
comprising North Cotabato, Sarangani, South Cotabato, and Sultan Kudarat provinces. (GRiSP,
2010)
Almost 70% of the total rice area is irrigated and the remaining 30% is rainfed and
upland. Much of the country’s irrigated rice is grown on the central plain of Luzon, the country’s
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ricebowl. Rainfed rice is found in the Cagayan Valley in northern Luzon, in Iloilo Province, and
on the coastal plains of Visayas and Ilocos in northern Luzon. Upland rice is grown in both
permanent and shifting cultivation systems scattered throughout the archipelago on rolling to
steep lands. (GRiSP, 2010)

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Because of their higher profitability for farmers, modern high-yielding varieties account
for the vast majority of rice production, with less than 3% of production coming from traditional
varieties. Labor use on rice is lower than in many developing Asian countries at about 60 person-
days/hectare/crop. Some of the reasons for the relatively low labor use are the widespread use of
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direct seeding and the mechanization of land preparation and threshing in many parts of the
country. (GRiSP, 2010)
Farm-level rice yields in the Philippines have grown in the last decade without a
significant change in inputs (fertilizer, herbicides) and crop establishment methods. This
progress in rice yields could be related to the use of good-quality seeds: hybrid and certified
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seeds. With strong partnership and support from IRRI, the country recently released a rice
variety for irrigated lowlands, the IRRI-bred Tubigan 18 (NSIC Rc222 or IRRI 154), which
yields up to 10 t/ha and has an average of 6 t/ha, 12–13% higher than that of the popular and
widely used rice variety PSB Rc82, also bred by IRRI and known as IRRI 123. The high-
yielding Tubigan varieties are recommended for irrigated lowland areas but tests done
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nationwide showed that they can also perform well in rainfed areas, particularly during the wet
season. (IRRI, 2014)
The Philippine Rice Research Institute (PhilRice) has also recently produced one
aromatic rice variety, Mabango (NSIC Rc128), and four glutinous rice varieties: Malagkit 1
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(NSIC Rc13), Malagkit 2 (NSIC Rc15), Malagkit 3 (NSIC Rc17), and Malagkit 4 (NSIC
Rc19). (IRRI, 2014)
Rice Production Constrainsts
Climate change, growing population, declining land area, high cost of inputs, and poor
drainage and inadequate irrigation facilities are the major constraints to rice production in the
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Philippines. Some of these constraints are interrelated. Unabated conversion of some agricultural
land to residential, commercial, and industrial land reduces the area devoted to rice production,
which leads to a shortage in domestic supply. (IRRI, 2014)
Climate change and the vulnerability of crop production to drought and heavy rainfall,
especially during the typhoon season, severely affect production. The Philippines bears the brunt
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of typhoons coming in from the Pacific Ocean. Successive heavy rains cause severe drainage
problems in paddy fields, thus resulting in a significant reduction in rice yield and quality. There
is also concern about the deterioration of irrigation systems at least partially because of a lack of
funding for maintenance. Rainfed lowland rice suffers from uncertain timing of the arrival of
rains, and drought and submergence—often in the same fields over the course of a single season
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or in different fields within a farm over the same season. Weeds, drought, diseases (blast), acidic
soils, and soil erosion are major problems of upland rice in the Philippines. The high cost of
inputs, particularly fertilizer, hinders farmers from applying optimal fertilizer amounts to input-
responsive high-yielding varieties. (IRRI, 2014)

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Rice Production Opportunities
For the Philippines to become self-sufficient in rice, it has to adopt existing technologies
such as improved varieties and know-how to have yield increase by 1–3 t/ha. Better quality seed
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combined with good management, including new postharvest technologies, is the best way to
improve rice yields and the quality of production. (IRRI, 2014)
Since current rice yield is way below the yield potential of most modern varieties, improved
fertilizer use and crop management, better irrigation facilities, and high-yielding varieties can
boost the country’s rice output. The main source of additional rice production is improved yield
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growth. However, the government must implement a strategy to reduce population growth since
the actual volume of rice produced by the country is not enough to match rice demand because of
the high increase in population. If population growth will be higher than the growth in yield, the
country will continue to import rice from other countries to meet domestic demand for rice in the
coming years. (IRRI, 2014)

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Theoretical Framwork
The Big Push Theory suggest that countries needed to jump from one stage of
development to another through a virtuous cycle, in which large investments in infrastructure

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and education coupled with private investments would move the economy to a more productive
stage, breaking free from economic paradigms appropriate to a lower productivity stage.
The Theory of Comparative Advantage argues that free trade works even if one partner in a
deal holds absolute advantage in all areas of production – that is, one partner makes products
cheaper, better and faster than its trading partner.

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Research Paradigm
Table 2.1 Research Paradigm

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INPUT PROCESS OUTPUT
Status of the Analysis of the effect Yearly rice production

independent variables of farmer’s wages, in the Philippines
government budget economic output
Farmers wages, and El niño to the rice
government budget and production of the Insights for policy
El niño Philippines makers if the
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CHAPTER III
RESEARCH METHODOLOGY
This chapter evinced the sources and types of data that the researcher used, how was it
analyzed and processed in order to provide probable answers to the questions provided in the
previous parts of this paper.

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Data Requirements and Sources
The time series data was used in the study and its annual frequency spanned the period of
1987-2014. Rice production, farmers wages and government budget will all be taken from
Philippine Statistics Authority while El Niño is taken from news.

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Methods of Research
Econometric Model
To measure the performance of the rice production in the Philippines economic output, linear
regression analysis will be utilized. In order to measure and quantify the results for the analysis
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the researcher based on the econometric model provided below. The model will help to
determine where to accept or reject hypothesis proposed in the chapter one of this study.
RICEPRODUCTION= βo+β 1*FARMERSWAGES+β 2*GOVTBUDGET+β 3*ELNINO+e
Where:
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RICEPRODUCTION = Rice production in the Philippines
FARMERSWAGES = Farmers wages
GOVTBUDGET = Government budget
ELNINO = El Niño
βo = Constant term or intercept

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β 1 = Elasticity of farmers wages
β 2 = Elasticity of government budget
β 3 = Elasticity of El niño
e = Error Term
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Diagnostics and Test
Test for Overall Significance
F-Test is a measure of the overall significance of the estimated regression line. It is used
to test multiple hypotheses about the parameters in an econometric model (Gujarati, 2003). To
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test the overall significance of the regression model, the F-test will be applied. The F-ratio is
computed as follows:
R2
(k  1)
F
(1  R 2 )( n  k )
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In which, R2 represents the coefficient of determination, k is the number of parameters,
and n is the number of observations. F test follows the following conditions:
Ho: The overall regression model is not significant.
Ha: the overall regression model is significant.

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At 5% significance level, the rejection of the null hypothesis will be based on the
decision rule below:
Reject Ho: If the absolute value of F-computed is greater than the F-critical value at 5%
level of significance.
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Accept Ho: If the absolute value of F-computed is less than the F-critical value at 5%
level of significance.
Test for Individual Significance

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T- Test is a measure of individual significance of a variable .The t-statistics will
be computed as follows:
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tˆ0 ˆ
Where and t1 are the values of the t-computed of the intercept and slope coefficient,
respectively. T-Test is the ratio of estimated regression coefficient divided by its standard error.
It is used to test a single hypothesis about the parameters in an econometric model. It verifies the
truth or falsity of the null hypothesis. The null hypothesis in this test is that variable is not
significant. T-test follows these conditions: If T computed lies in the critical region, null
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hypothesis must be rejected. If T computed does not lie in the critical region, the null hypothesis
must be accepted [CITATION Guh03 \l 1033 ]
Measure of Goodness of Fit / Coefficient of Determination (R2)
R2 is defined as the measure of goodness of fit of the regression equation that gives the
percentage of the total variation in Y explained by the regression model. If the computed R2 is 1,
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fitted regression model explains 100 percent of the variation in the regress and. The fit of the
model is said to be better if R2 is closer to 1.
The coefficient of determination is considered as the predictive power of the model.
Wherein, the R2 considered as more meaningful measure than r, it provides an overall measure to
which the variation in one variable determines the variation in another variable wherein it states
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the proportion of variation in the dependent variable explained by the explanatory variables.
(Gujarati , 2004)
The formula is in measuring the coefficient of determination is measured by:

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2 ( ∑ Y i Y^ i ¿ ¿ 2)
r= ¿
( ∑ Y i ¿¿ 2)( ∑ Y^ i ¿¿ 2)¿ ¿
Where Yi = actual Y, Y^ i = estimated Y, and Ý = Y^´ = the mean of Y. Wherein, it states that
when the computed R2 is closer to 1, the higher is the predictive power of model.
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Test of Multicollinearity
Multicollinearity exists in multiple linear regression. The predictor variables are highly
correlated. To find out to what extent that the regressand or outcome can be predicted by the
regressors or independent variable is one of the purposes of regression. The R2 measures the
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strength of the prediction which is also known as variance explained wherein, multicollinearity
increases the standard errors of the coefficients. [ CITATION Ran15 \l 1033 ] To measure the
prescence multicollinearity, variance inflation factor (VIF) will be utilized .Further; it will assess
how much the variance of an estimated regression coefficient increases if your predictors are
correlated. If no factors are correlated, the VIFs will all be 1.

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The formula for VIF is:
VIF = 1 / (1 - Ri2)
Serious multicollinearity problem can be ruled out if the Variance Inflationary Factor
(VIF) value is lower than 10.

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Test of Normality of Residuals
The Jarque – Bera (JB) Test of Normality is considered as asymptotic or large-sample
test which is also based on the residuals of the Ordinary Least Squares (OLS). The test primarily
computes the scenes and kurtosis measures of the OLS residuals (Gujarati , 2004).
The Jarque - Bera statistic is computed using the formula:

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JB = n [S2 + (K – 3)2]
6 24
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Where: n = sample size, S = skewness coefficient, and K = kurtosis coefficient. For a
normally distributed variable, S = 0 and K = 3. Hence, respectively, the test of the joint
hypothesis that S and K are 0 and 3 is characterized by the JB test of normality.

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Therefore in that case, the value of the JB statistic is expected to be 0. (Gujarati, 2004).
As a rule if the computed Jarque – Bera coefficient is higher than 5 percent, it concludes that the
residuals are normally distributed.
Specification Error Test

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Regression Specification Error Test or the RESET will be used for the linear regression
model wherein the said test is used to test different specification errors such as incorrect
functional form, redundant and omitted variables. (Gujarati , 2004)
In addition, it explains that the response variable it tests whether non-linear combinations of the
fitted values. Afterwards, F – test will be conducted for the functional form of the model.
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Wherein, if the f- statistic exceeds the critical value, misspecification error will be ruled out
otherwise, the null hypothesis is accepted.
The F - statistic is computed using the formula:

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( SSRYˆ  SSRYˆ 2 ) / M
F M ; N  k 1 
SSRYˆ 2 /( N  K )
( SSRR  SSRUR ) / M

SSRUR /( N  K )
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Where: SSRs are the sum of squared residuals for the respective regressions; M is the
number of restrictions; N is the number of observations; K is the number of parameters estimated
in the unrestricted equation.
Heteroskedasticity Test
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There is a presence of Heteroskedasticity if the variance of the error term is constant for
all observations do not hold which is an assumption of the Ordinary Least Squares (OLS)
(Salvatore & Reagle, 2002). The test of White – Heteroskedasticity was used to test if the
regression residuals have unequal variances.

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The general test of Heteroskedasticity as proposed by White does not rely on the
normality assumption and is much easier to implement (Gujarati, 2004).
White Heteroskedasticity test is computed using the formula:
U2 = ß0 + ß1X1t + ß2X2t + ß3Y21t + ß4Y22t + ß5Y1Y2 + Vt

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If the computed R2 multiplied by the sample size (n) times; which is the R2 obtained
from the auxiliary regression asymptotically which follows the chi-square distribution wherein in
the auxillary regression the df is equal to the number of regressors, the null hypothesis of
heteroskedasticity can be ruled out.

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In other words, if the chi – square exceeds the critical chi-square value at the chosen level
of significance, there is a presence of heterskedasticity otherwise, there is no prescence of
heteroskedasticity in the model (Gujarati, 2004).
Stability Test
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Structural changes possibly caused by differences in the intercept or the slope coefficient
or both are characterized by the Chow Test (Gujarati, 2004). The model uses F-test in oder to test
which of the two regression is more efficient: single regression and two separate regressions
which involve splitting the data into two sub-samples

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Wherein, if the calculated f- ratio exceeds the critical value, the null hypothesis structural
stability can be ruled out,otherwise, the null hypothesis is accepted.
To determine the presence of structural break, the formula of F- test is need which is stated
below:
RSSc  ( RSS1  RSS2 ) / k

F
RSS1  RSS2 / n  2k
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CHAPTER IV
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
This chapter presented the obtained data in graphical representations, the descriptive
analysis and the interpretation of the obtained results from the statistical tests and treatments
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used. First part of the chapter will be the trend and descriptive analysis of every data gathered,
followed by the regression results and analysis.
Trend and Growth Patterns
Rice Production Performance

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20000000
18000000
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
1 9 1 9 19 19 19 1 9 1 9 1 9 1 9 19 19 19 1 9 2 0 2 0 20 2 0 2 0 2 0 20 20 20 20 2 0 2 0 2 0 20 20
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Figure 4.1 Performance of Rice Production
Source: Philippine Statistics Authority – Country Stat Philippines
Figure 4.1 shows the performance of rice production in the Philippines for the year-on-year trend
and growth pattern from 1987-2014. In the years 1997-1998 and 2010 it can be observed that
there was a significant decrease and this is due to the El Niño. On the average, the 28-year period
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exhibits a positive growth with an average growth rate of 3.41. During the 1997-1998 El Niño,
the country suffered water and food shortages as 70 percent of the country experienced a severe
drought. Reports said damage to agriculture reached P8.46 billion as nearly 74,000 hectares of
agricultural land in 18 provinces were affected by the dry spell. Citing UN data, the Department
of Agriculture said the country’s rice and corn production during the first half of 1998 went
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down 27 percent and 44 percent, respectively. Back then, some 900,000 people in Central
Visayas were affected by the prolonged drought. In Mindanao, 74 people died and more than
450,000 agricultural families faced severe food insecurity because of the drought. [ CITATION
Phi15 \l 1033 ] While during 2009-2010 El niño 478,025 families or 2,868,150 persons were
affected, and 57 provinces in at least 10 regions were gripped by drought. In a report by the
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National Disaster Risk Reduction and Management Council, 542,067 hectares of farmland were
damaged. A total of 788,738 metric tons of palay, corn and other crops worth Php12,107,125,788
billion were damaged. Another reason for year 2009 because it was the year that typhoon Ondoy
and Pepeng entered. [CITATION CDR10 \l 1033 ]

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Farmers’ Wages Performance

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Figure 4.2 Farmers' Wages Performance

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250.00
200.00
150.00
100.00
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Figure 4.2 shows the trend and growth patterns of farmers’ wages for the period of
1987-2014. It can be observed that the behavior of farmer’s wages exhibits a positive growth
with an average growth rate of 1.79.

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Government Budget Performance

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Figure 4.3 Government Budget Performance

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120000
100000
80000
60000
40000
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Figure 4.3 shows the trend and growth patterns of government budget for agriculture for the
period of 1987-2014. It can be observed that the behavior of government budget exhibits a
positive growth with an average growth rate of 15.05. In the years 1998 and 2011 it can be
observed that there was a significant decrease and this is again due to the El Niño. While in the
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year 2008 it can be observed that there was a significant increase and this is due to global rice
crisis. While in the year 2014 it can be observed that there was a significant increase also and
this is due to the preparation for incoming El Niño in 2015-2016..

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Estimation Results
Econometric Model: Factors affecting rice production
Based on the statistical results using the ordinary least squares estimation procedure for
parameters which inferences can be drawn through the model equation specified as:
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RICEPRODUCTION=−4.84e+06+1.01e+05∗FARMERSWAGES+38.6∗GOVTBUDGET −1.38e+06∗ELNINO
(Equation 4.1)
The model suggests that on the average the growth of rice production in terms of annual
performance (volume) decreased by -4.84e+06 percentage points if all the independent variables
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specified herein remain unchanged. This infers that for Rice production annual performance
(volume) to expand, it should be driven by strong farmers wages growth, government budget
growth and decline of El Niño.
Rice production annual performance (volume) will increase by 1.01e+05 percentage
points for every percent change in the farmers’ wages. Moreover, rice production will expand by
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38.6 percentage points for every increase of government budget. The El Niño affects also the
performance of rice production. Rice production annual performance (volume) will decrease by
-1.38e+06 percentage points for every percent change in the El Niño.

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Table 4.1 Factors Affecting Rice Production Econometric Model

Model 1: OLS, using observations 1987-2014 (T = 28)
Dependent variable: RICEPRODUCTION
Coefficient Std. Error t-ratio p-value

const −4.8414e+06 2.48543e+06 −1.9479 0.0632 *
FARMERSWAGES 100534 17371 5.7875 <0.0001 ***
GOVTBUDGET 38.5904 11.1319 3.4667 0.0020 ***
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ELNINO −1.37712e+06 417060 −3.3020 0.0030 ***
Mean dependent var 12937773 S.D. dependent var 3325498

Sum squared resid 1.37e+13 S.E. of regression 755630.9
R-squared 0.954106 Adjusted R-squared 0.948370
F(3, 24) 166.3157 P-value(F) 3.44e-16
Log-likelihood −416.5608 Akaike criterion 841.1216
Schwarz criterion 846.4504 Hannan-Quinn 842.7507
rho 0.134713 Durbin-Watson 1.593463
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Table 4.1 presents the regression results for the factors affecting rice production from
1987 to 2014, for a total of 28 observations. The rice production series as illustrated in Figure 4.1
exhibited a sustained moderate growth. To inspect if the series is stationary the unit root exercise
the following results are obtained:

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o Carrying out the unit root tests, we obtained the following statistics: -0.028 (no
intercept, no trend, one-lagged difference) and -0.030 (intercept, one-lagged
difference).
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o Each of these statistics at 5 percent confidence level, in absolute value, was less
than the critical t-value confirming the graphical impression that the Rice
production series is non-stationary.
In terms of the variability, Rice production growth pattern can be explained by the
movements of the variables by 94.84%. The computed Durbin-Watson value of the model lies
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between the upper and lower limit (1.181 < 1.59 < 1.65) that indicates no evidence of serial
correlation. With a 95% degree of confidence, p-values indicate that all the variables are
statistically significant. This leads to the acceptance of the alternative hypothesis that Farmers’
Wages, Government Budget and El niño have significant impact to the volume of Rice
Production.
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To check whether non-linear combinations of the fitted values help explain the response
variable of this model Ramsey Reset was utilized.
Table 4.2 Ramsey Reset Test

Auxiliary regression for RESET specification test
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OLS, using observations 1987-2014 (T = 28)

coefficient std. error t-ratio p-value
----------------------------------------------------------------------------------------------------------------
const 3.31382e+07 2.45658e+07 1.349 0.1911
FARMERSWAGES −326790 269151 −1.214 0.2376
GOVTBUDGET −121.832 119.849 −1.017 0.3204
ELNINO 4.28861e+06 3.98627e+06 1.076 0.2937
yhat^2 3.32363e-07 1.96563e-07 1.691 0.1050
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yhat^3 0 0 −1.900 0.0706 *
Test statistic: F = 5.719069,

with p-value = P(F(2,22) > 5.71907) = 0.01
Table 4.2 presents the Ramsey Reset test result that indicates there is a functional form
misspecification since the results fail to reject the null hypothesis due to P-value did not exceed
the level of significance 5%.
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To check whether residuals are normally distributed help explain the response variable of
this model Normality Test of Residuals was utilized.
Table 4.3 Normality Test of Residuals
Frequency distribution for uhat1, obs 1-28
number of bins = 7, mean = -2.72744e-09, sd = 755631
interval midpt frequency rel. cum.

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< -1.521e+06 -1.79e+06 2 7.14% 7.14% **

-1.521e+06 - -9.909e+05 -1.26e+06 0 0.00% 7.14%
-9.909e+05 - -4.606e+05 -7.26e+05 5 17.86% 25.00% ******
-4.606e+05 - 6.967e+04 -1.96e+05 8 28.57% 53.57% **********
6.967e+04 - 6.000e+05 3.348e+05 7 25.00% 78.57% *********
6.000e+05 - 1.130e+06 8.651e+05 5 17.86% 96.43% ******
>= 1.130e+06 11.4e+06 1 3.57% 100.00% *
Test for null hypothesis of normal distribution:

Chi-square(2) = 2.772 with p-value 0.25011
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Table 4.3 presents the Normality test of Residual result that indicates residuals are not
normally distributed since the results reject the null hypothesis due to P-value exceed the level of
significance 5%.
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Figure 4.4 Test Statistics for Normality

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Figure 4.4 presents Test Statistics for Normality shows that the departure from normality
is not too severe.
To check whether the estimated variance of the residuals from a regression are dependent
on the values of the independent variables. Breusch-Pagan test was utilized.
Table 4.4 Breusch-Pagan test for heteroskedasticity

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Dependent variable: scaled uhat^2

-------------------------------------------------------------------------------------
const −7.26375 4.94124 −1.470 0.1545
FARMERSWAGES 0.0546855 0.0345350 1.583 0.1264
GOVTBUDGET −2.54767e-05 2.21312e-05 −1.151 0.2610
ELNINO 1.68869 0.829151 2.037 0.0529 *
Explained sum of squares = 16.4519

Test statistic: LM = 8.225938,
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with p-value = P(Chi-square(3) > 8.225938) = 0.041566
Table 4.4 presents the Breusch-Pagan test result that indicates there is no presence of
heteroskedasticity or it is homoscedastic since the results fail to reject the null hypothesis due to
P-value does not exceed the level of significance 5%.
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To check whether the coefficients in two linear regressions on different data sets are
equal. Chow test was utilized.
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Table 4.5 Chow Test

Augmented regression for Chow test
--------------------------------------------------------------------------------------------------
const 6.61860e+06 6.13141e+06 1.079 0.2932
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FARMERSWAGES 11700.3 46982.3 0.2490 0.8059

GOVTBUDGET 147.864 68.0146 2.174 0.0419 **
ELNINO −1.58799e+06 634662 −2.502 0.0211 **
splitdum −6.99746e+06 8.34976e+06 −0.8380 0.4119
sd_FARMERSWAGES 64947.4 58971.2 1.101 0.2838
sd_GOVTBUDGET −110.403 69.6477 −1.585 0.1286
sd_ELNINO 685192 866838 0.7904 0.4385

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F(7, 20) 86.16712 P-value(F) 1.53e-13
Chow test for structural break at observation 2000

F(4, 20) = 2.1499 with p-value 0.1121
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Table 4.5 presents the Chow test result that indicates there is no structural break in data
since the results fail to reject the null hypothesis due to P-value exceeds the level of significance
5%.
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To check if Multicollinearity is evident, that is when two or more independent variables

have an existing linear relationship between or among them. The presence of Multicollinearity
can be with the Variance-Inflating Factor:
VIF
FARMERSWAGES 6.174
GOVTBUDGET 6.282
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ELNINO 1.044
The Variance Inflation Factors (VIF) for each independent variable is significantly less
than 10 and as a rule of thumb, then the independent variables are free from any serious
Multicollinearity problem.
Hypothesis Testing
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Hypothesis 1: Farmers’ wages have significant impact to the rice production of the
Philippines.
Conclusion: Accept
Hypothesis 2: Government budget have significant impact to the rice production of the
Philippines.
Conclusion: Accept
Hypothesis 3: El niño have significant impact to the rice production of the Philippines.
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Conclusion: Accept
Hypothesis 4: Rice production in the Philippines exhibits a positive relationship with the
Government budget.
Conclusion: Accept
Hypothesis 5: Government budget exhibits a positive relationship with farmers’ wages.
Conclusion: Accept
Hypothesis 6: Rice production exhibits a positive relationship with farmers’ wages.
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Conclusion: Accept
Hypothesis 7: El niño exhibits a positive relationship with farmers’ wages.
Conclusion: Accept
Hypothesis 8: El niño exhibits a positive relationship with government budget.
Conclusion: Accept
Hypothesis 9: El niño exhibits a positive relationship with rice production.
Conclusion: Accept
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The estimated value of the coefficient in terms of the T-ratios exceeds two in magnitude
leads us to conclude that all the parameters (macroeconomic indicators) are statistically
significant at 90 - 95 percent confidence level in explaining the variations of volume Rice
Production. The regression results also indicated that the factors affecting the trend of the
volume of Rice Production are of the expected signs, which lead us to accept hypotheses 1 to 5.
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CHAPTER V
CONCLUSIONS AND RECOMMENDATIONS

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Summary of the Study
The paper attempted to estimate the impact of farmers’ wages, government budget and El
niño destinations to the rice production of the Philippines. Specifically, the researcher examined
the trend and growth patterns of the farmers wages and government budget that actually affected
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the annually performance of rice production. The researcher has drawn inferences to the 28
observations (annually time-series data) that it processed through the use of statistical tools for
the descriptive and inferential analysis part of the study.
The impact of farmers’ wages, government budget and El niño to the rice production of
the Philippine was estimated through multiple regressions.

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The study is limited to the country’s historical annually rice production performance from
1987 to 2014. The significant findings of the study only discussed the link between farmers’
wages, government budget and El niño to the rice production of the Philippines.
Summary of Findings
 Historically from 1987-2014, rice production in the Philippines had been growing by 3.41%
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on the average per annum.
 Historically from 1987-2014, government budget for agriculture had been growing by
15.05% on the average per annum.
 Historically from 1987-2014, farmers’ wages had been growing by 1.79% on the average per
annum.
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 Rice production performance: On the average for the past 28 years, the government budget
and farmers wages is a plays a valuable role in improving productivity and El niño is a
considerable contributor that rice production decreases
 The hiring of extra hands to harvest crops and prepare them for the market as the biggest
factor in jacking up production cost for rice farmers.

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 Imports remain high because consumption rises by about 3.4% per year faster than the rate of
population growth.
Conclusions
Finding suggests that the government budget positively affects rice production in the
Philippines. Therefore government budget is concerned and taking actions of the status quo. In
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2013 it is reported that 96% rice self-sufficiency was achieved when local farmers produced
18.44 million metric tons of rice, the country’s highest rice production in history and as of July
22, 2013 the country has exported premium and organic black rice varieties. But despite the
media blitz from the DA, the country was still importing thousands of metric tons of rice from
countries like Vietnam and Thailand. The country is still one of the top rice importers in the
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world due to typhoons, notably Super Typhoon Yolanda and the 2015-2016 El niño that it is said
to be worst than 1997-1998 El niño. The Philippines continues to import and imported 2 MT in
2014 to curtail prices, which have surged 18%. The 96% self-sufficiency in 2013 is not good due
to Philippines still lack the comparative advantage. The production is already good but the cost
of production is still high which means our rice is expensive on the commercial side. Selling this
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local rice will not be appealing to consumers for the price is high. This rice self sufficiency is a
dangerous dream for Philippines for we would take the risk of having an unreasonable high price
of rice. The only way to reduce importation is to help rice farmers first to lower their production
cost so as to make the price of local rice more competitive with Vietnam and Thailand.
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Finding suggests that the farmers’ wages positively affects rice production. Therefore is
necessary to increase farmers’ wages. This could result to enticing younger generation or
unemployed citizens to be a farmer and work hard thus increase production

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Recommendations
To increase rice production the government should allot more to agricultural sector and
specifically invest it on how to produce rice at a lower cost. Thailand rice is being produced at a
cost of P8.40 (US$0.19) per kilogram, while Vietnam rice is being produced at P5.40 ($0.12) per
kilogram. In comparison, each kilogram of Philippine rice costs more than P10 ($0.23) to
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produce. Knowing where the problem lies DA in 2013 conducted a program called
“Palayabangan: The 10-5 Challenge,” referring to the goal of producing 10 tons of rice per
hectare at a cost of P5 per hectare. An Isabella farmer succeeded in meeting the challenge,
producing 10.55 tons per hectare, at a cost of only P4.97 per kilo. With this in mind we just need
to get the nation’s farmers to see how they can adopt the methods and techniques used in the
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Isabella farm. Aside from this is to help farmers gain access to modernize machines like rice
threshers, combine harvesters, rice transplanter and many more. The isabela farmer suggests that
to use modernize technology to improve the rice production. With this we could reduce the
number of farmers per hectare from 20 farmers to just 2-3 farmers per hectare which reduces the
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cost of production and also speed up production. Through this movement rice self-sufficiency
could be achieved at a lower price and we may even start to export again and stop importing.
It is a necessary to increase farmers’ wages. Increasing farmers’ wages could result to
enticing younger generation or unemployed citizen and also encourage farmers to work hard but
not too much because it will also increase the cost of production thus increasing the price of rice.
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What more is important is to modernize agriculture sector and educate farmers. Some farmers
are only focus on rice when they could be planting other crops to increase their income. There
should also be trading centers nationwide to allow farmers to sell directly to the market. Another
is to hire farmers by the government during planting season to provide them more income.
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As for the future researchers, the study still needs further refinement, particularly in the
specification of variables. Other variables that may be used in order to develop the study are the
following (most of which are unavailable or incomplete as of the time the study was conducted):
o Components of government budget
o Educational attainment of farmers

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o Technologies
o Soil quality
o Rice Farming Land Area
o
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REFERENCES
Bordey, F. H. (2010). The impacts of research on Philippine rice production. PhD diss.
University of Illinois.
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Umetsu, Chieko, Lekprichakul, T., & Chakravorty, U. (2003). "Efficiency and technical change
in the Philippine rice sector: A Malmquist total factor productivity analysis." American
journal of agricultural economics 85, no. 4.

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Lansigan, F. P., De Los Santos, W. L., & Coladilla, J. O. (2000). "Agronomic impacts of climate
variability on rice production in the Philippines." Agriculture, ecosystems & environment
82 (Vol. no. 1).
Diagne, Mandiaye, Demont, M., Seck, P. A., & Diaw, A. (2013). "Self-sufficiency policy and
irrigated rice productivity in the Senegal River Valley." Food Security 5, no. 1 .
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Pate, N. T., & Cruz, A. T. (2007). "Technical efficiency of Philippine rice-producing region: An
econometric approach." In 10th National Convention on Statistics, .
Timmer, C. P. (2012). "Behavioral dimensions of food security." Proceedings of the National
Academy of Sciences 109, no. 31 .

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Manila Bulletin. (2014). Editorial: We can stop importing rice. Retrieved from
http://www.mb.com.ph/editorial-we-can-stop-importing-rice/
Philrice. (2013). Retrieved from To import or not to import:
https://ricematters.wordpress.com/2011/06/13/to-import-or-not-to-import/
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IRRI. (2014). Retrieved from Why does the Philippines import rice?: http://irri.org/news/hot-
topics/why-does-the-philippines-import-rice
Ranjit, n. (2015). Multicollinearity. University of Notre Dame.
Gujarati, D. (2004). Basic Econometrics 4th Edition. New York: McGraw-Hill.

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Philippine Daily Inquirer. (2015). Retrieved from Pagasa warns: El Niño most intense in 17 yrs
by October : http://newsinfo.inquirer.net/709006/pagasa-warns-el-nino-most-intense-in-
17-yrs-by-october
Philippines Statistics Authority. (2016). Retrieved from Country Stat:
http://countrystat.psa.gov.ph/?cont=10&pageid=1&ma=R80OTAHE
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World Bank. (2007). Philippines: Agriculture Public Expenditure Review. Technical Working
Paper, Manila: The World Bank Group East Asia and the Pacific Region.
Dawe, D. (2015). Rice self-sufficiency: A question of geography? Retrieved from Rappler.com:
http://www.rappler.com/views/imho/115639-rice-self-sufficiency-geography
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Danao, A. (2014). PH road to rice self-sufficiency. Retrieved from Rappler.com:
http://www.rappler.com/move-ph/issues/hunger/60722-philippine-rice-self-sufficiency-
2014
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Briones, R., & Galang, I. M. (2013). ice self-sufficiency: the dangerous dream . Retrieved from
Rappler.com: http://www.rappler.com/business/19561-philipppine-rice-self-sufficiency-
the-dangerous-dream
CDRC. (2010). Citizens Disaster Report Center: Philippine Disaster Report.

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APPENDICES
APPENDIX A OLS MODEL 1 FACTORS AFFECTING RICE PRODUCTION

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Model 1: OLS, using observations 1987-2014 (T = 28)

Coefficient Std. Error t-ratio p-value

const −4.8414e+06 2.48543e+06 −1.9479 0.0632 *
FARMERSWAGES 100534 17371 5.7875 <0.0001 ***
GOVTBUDGET 38.5904 11.1319 3.4667 0.0020 ***
ELNINO −1.37712e+06 417060 −3.3020 0.0030 ***
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F(3, 24) 166.3157 P-value(F) 3.44e-16
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APPENDIX B RAMSEY RESET TEST

Auxiliary regression for RESET specification test
-----------------------------------------------------------------------------------------------------------
-----
const 3.31382e+07 2.45658e+07 1.349 0.1911
FARMERSWAG
ES −326790 269151 −1.214 0.2376
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GOVTBUDGET −121.832 119.849 −1.017 0.3204

ELNINO 4.28861e+06 3.98627e+06 1.076 0.2937
yhat^2 3.32363e-07 1.96563e-07 1.691 0.1050
yhat^3 0 0 −1.900 0.0706 *
Test statistic: F = 5.719069,

with p-value = P(F(2,22) > 5.71907) = 0.01
APPENDIX C NORMALITY TEST OF RESIDUALS

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Frequency distribution for uhat1, obs 1-28

number of bins = 7, mean = -2.72744e-09, sd = 755631
interval midpt frequency rel. cum.

< -1.521e+06 -1.79e+06 2 7.14% 7.14% **
-1.521e+06 - -9.909e+05 -1.26e+06 0 0.00% 7.14%
-9.909e+05 - -4.606e+05 -7.26e+05 5 17.86% 25.00% ******
-4.606e+05 - 6.967e+04 -1.96e+05 8 28.57% 53.57% **********
6.967e+04 - 6.000e+05 3.348e+05 7 25.00% 78.57% *********
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6.000e+05 - 1.130e+06 8.651e+05 5 17.86% 96.43% ******

>= 1.130e+06 11.4e+06 1 3.57% 100.00% *
Test for null hypothesis of normal distribution:

Chi-square(2) = 2.772 with p-value 0.25011
APPENDIX D TEST STATISTICS FOR NORMALITY

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APPENDIX E BREUSCH-PAGAN TEST FOR HETEROSKEDASTICITY

Dependent variable: scaled uhat^2
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-------------------------------------------------------------------------------------
const −7.26375 4.94124 −1.470 0.1545
FARMERSWAGES 0.0546855 0.0345350 1.583 0.1264
GOVTBUDGET −2.54767e-05 2.21312e-05 −1.151 0.2610
ELNINO 1.68869 0.829151 2.037 0.0529 *
Explained sum of squares = 16.4519

Test statistic: LM = 8.225938,
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with p-value = P(Chi-square(3) > 8.225938) = 0.041566
APPENDIX F CHOW TEST
Augmented regression for Chow test

--------------------------------------------------------------------------------------------------
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const 6.61860e+06 6.13141e+06 1.079 0.2932

FARMERSWAGES 11700.3 46982.3 0.2490 0.8059
GOVTBUDGET 147.864 68.0146 2.174 0.0419 **
ELNINO −1.58799e+06 634662 −2.502 0.0211 **
splitdum −6.99746e+06 8.34976e+06 −0.8380 0.4119
sd_FARMERSWAGES 64947.4 58971.2 1.101 0.2838
sd_GOVTBUDGET −110.403 69.6477 −1.585 0.1286
sd_ELNINO 685192 866838 0.7904 0.4385
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F(7, 20) 86.16712 P-value(F) 1.53e-13
Chow test for structural break at observation 2000

F(4, 20) = 2.1499 with p-value 0.1121
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APPENDIX G TIME SERIES OF RICE PRODUCTION, FARMERS WAGES AND
GOVERNMENT BUDGET
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20000000
18000000
16000000
14000000
12000000
10000000
8000000
6000000
4000000
2000000
0
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
19 1 9 1 9 19 1 9 1 9 19 1 9 19 19 1 9 19 19 2 0 2 0 20 2 0 2 0 20 20 2 0 20 2 0 2 0 20 2 0 2 0 20
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APPENDIX H RICE PRODUCTION PERFORMANCE

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APPENDIX I FARMERS WAGES PERFORMANCE

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250.00
200.00
150.00
100.00
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APPENDIX K GOVERNMENT BUDGET PERFORMANCE

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120000
100000
80000
60000
40000
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APPENDIX L DATABASE
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Year RICEPRODUCTION GOVTBUDGET FARMERSWAGES ELNINO

1987 8539852.00 5115 130.57 0
1988 8971030.00 5273 133.07 0
1989 9458772.00 6990 135.57 0
1990 9319276.00 8490 138.07 0
1991 9673262.00 8589 140.57 0
1992 9128940.00 9366 143.06 0
1993 9434208.00 8601 145.56 0
1994 10538054.00 10075 148.06 0
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1995 10540649.00 12839 150.56 0

1996 11283568.00 15479 153.06 0
1997 11268963.00 23854 155.56 1
1998 8554824.00 17354 158.06 1
1999 11786625.00 26847 160.55 0
2000 12389412.00 28722 163.05 0
2001 12954870.00 30999 165.55 0
2002 13270653.00 26798 172.92 0
2003 13499884.00 32932 175.42 0
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2004 14496784.00 28462 174.51 0

2005 14603005.00 39782 171.39 0
2006 15326706.00 38711 171.87 0
2007 16240194.00 60042 178.88 0
2008 16815548.00 94358 184.19 0
2009 16266417.00 81422 184.01 1
2010 15772319.00 86239 185.49 1
2011 16684062.00 56012 187.26 0
2012 18032525.47 88186 190.36 0
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2013 18439419.73 94166 193.51 0

2014 18967826.17 112087 209.74 0

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COLLEGE OF ARTS AND SCIENCES

SAN BEDA COLLEGE

COLLEGE OF ARTS AND SCIENCES

ANALYSIS OF THE ECONOMIC FACTORS AFFECTING RICE PRODUCTION IN

PRESENTED TO THE DEPARTMENT OF ECONOMICS

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE COURSE

ECONOMIC RESEARCH II (ECO26)

NAME OF INSTITUTION: San Beda College

ADDRESS : Mendiola, Manila

TITLE OF THESIS : Analysis of the Economic Factors Affecting Rice Production in

AUTHOR : Paul Jade M. Uy

DEGREE : Bachelor of Science in Economics and Public Policy

DATE OF COMPLETION: April 2016

harvesters, transplanter and many more.

compassion to finish my thesis in which motivates me to be a better economist. To my thesis

made possible. Thank you so much and God bless us all!

STATEMENT OF ASSUMPTIONS AND HYPOTHESES......................................................................5

OVERVIEW OF RESEARCH PROBLEM

Filipinos cost of living then the more people would be in poverty.

In continuous debate of economists, politicians and even ordinary people argue of

rice. Furthermore the Philippines is already benefiting from technological modernization.

grow and produce rice and also other crops.

Background of the Study

2003). Achieving self-sufficiency in food grain production is a key development objective in

than to produce it ourselves. (Manila Bulletin, 2014)

Statement of the Problem

aimed to answer the following questions:

2. What is the status of the following factors related to rice production?

2.1 Farmers wages

2.2 Government budget

production in the Philippines?

Statement of Assumptions and Hypotheses

5. Ho: Government budget exhibits a negative relationship with farmers’ wages

Ha: Government budget exhibits a positive relationship with farmers’ wages

6. Ho: Rice production exhibits a negative relationship with farmers’ wages

Ha: Rice production exhibits a positive relationship with farmers’ wages

7. Ho: El Niño exhibits a negative relationship with farmers’ wages

Ha: El Niño exhibits a positive relationship with farmers’ wages

8. Ho: El Niño exhibits a negative relationship with government budget

Ha: El Niño exhibits a positive relationship with government budget

9. Ho: El Niño exhibits a negative relationship with rice production

Ha: El Niño exhibits a positive relationship with rice production

Relevance of the Study

production in the Philippines.

production for the ever-increasing population.

because it can increase the income of farmers.

Scope and Limitations of the Study

rice production of the Philippines.

seller of such goods and services is referred to as an "exporter" and is

border, from an external source. The party bringing in the good is

particularly in the developing world

temperatures when compared with the average value.

First Millennium eight international development goals that were established following

The face of a season with little or no harvest. There are several

business chooses to conduct with the intention of making a discovery

that can either lead to the development of new products or

procedures, or to improvement of existing products or procedures.

Cartel formed to monopolize production and distribution of a product or

sevice, control prices, etcetera

Which is also referred to as net exports, is an economic condition that

REVIEW OF RELATED LITERATURE