Rice production cost in PH higher than neighbors' By Ronnel W. Domingo | 06 October 2016

(1) The Food and Agriculture Organization (FAO) said prices of major food commodities were back on longterm downtrend following price spikes of 2008-2012.

(2) In the meantime, domestic prices of rice in the Philippines remained relatively high compared to prices in neighboring countries as the country moved toward a more open trade regime for the staple grain.

(3) Industry figures show that the cost of producing palay in the Philippines was around P10-P12 per kilo, while farmers in Vietnam grow them at P6.50 a kilo and in Thailand and India at about P9 a kilo.

(4) The FAO called for targeted safety nets to encourage small-scale farmers to continue producing while ensuring that food remained affordable to consumers.

(5) "Low food prices reduce the incomes of farmers, especially poor family farmers who produce staple food in the developing countries," FAO director general Jose Graziano da Silva said in a statement.

(6) "This cut in the flow of cash into rural communities also reduces the incentives for new investments in production, infrastructure and services," Graziano da Silva said.

(7) He said that globally, food prices were believed to be back to their long-term downward trend in real terms, as supply growth outpaces demand, following a prolonged period of volatility in food markets.

(8) Graziano da Silva said open trade could contribute to global food security and better nutrition, although openness to trade could also bring risks.

(9) He said the elimination of agricultural export subsidies that affect prices in global markets could be a way to improve trade and help small farmers in developing countries.

(10) The FAO chief said strengthening targeted social protection programs such as food vouchers was key to make farming more rewarding to producers and still affordable for consumers.

(11) In the Agricultural Outlook report issued jointly with the Organization for Economic Co-operation and Development, the FAO noted that mainly because of climate change, it was highly probable that "some abrupt price surges may occur" over the next 10 years

Answer the following questions:

1. What are the determinants of supply that were mentioned in the article?

2. Would each determinant increase or decrease the supply of palay? Explain.

Determinants of Supply:

Rubric for grading: CRITERIA POINTS Students could identify portions of the article that show 5 determinants of supply. Students could explain if the determinant would increase or 5 decrease the supply. Each member of the group was able to participate in their 5 groups' summary (individual score). TOTAL 15Profit is the major motivating factor in producing goods and services. Producers tend to increase supply with the potential of earning a better profit. However, there are still other considerations regarding the increase or decrease in supply. The following are the other determinants of supply: Resource prices. Resource prices directly affect the cost of production of goods and services. Producers tend to produce more volume of goods when the prices of the input products are low. On the contrary, when the prices of input products are of high cost, the producers would often reduce their supply. For example, a wage hike may prompt a reduction in production on supply. Technology. Technology advancement catalyzes a fast and high volume of production. As a producer adapts to a higher level of technology, it could increase supply. Tractors and equipment have played a role in the expansion of agricultural supply. 06 Handout 1 student. feedback @ sti.edu Page 3 of 4 BM2205 Factors in nature and politics. Natural calamities such as typhoons and drought can destroy agricultural products. Likewise, political conditions can affect the supply of goods and services. For instance, wars cause a reduction in the production of supply. Tax and subsidies. The imposition of high taxes on goods and services may prompt producers to reduce supply. On the other hand, government subsidies and grants would push the producers to increase their supply. This usually happens in the agricultural sector in the country, wherein the government provides aid for smallholder farmers in the form of financial assistance or provision of seeds or seedlings. Price expectations. When there is an expected increase in the price of a particular good at an expected time, the producers will hoard or keep their supply until its price increase has been actualized. An example is an increase in the supply of flowers during Valentine's Day and All Saints' Day. On these occasions, the price of the flowers is also at its peak