Gov’t allocates P19 billion to combat El Niño

The imminent threat brought about by the El Niño phenomenon, set to peak during the first half of next year and expected to cause drought in major provinces, is already being addressed, the country's chief economist revealed.

In a December 17 interview, Socioeconomic Planning Secretary Arsenio M. Balisacan said that many provinces are expected to experience drought or dry spells when El Niño peaks—according to the latest data from PAGASA—around March, April and May.

Balisacan added that President Benigno Aquino III approved on December 11 a P19 billion budget to combat the effects of El Niño.

"We have the money already for this identified by our Budget Secretary—part of this, roughly about P6.6 billion, is in the current budget. The rest would be sourced from savings from other programs like projects that were bidded," Balisacan said. He did not elaborate.

"Gravity of that, we are already programming. We are already taking the worst assumption, worst[-case] scenario, [into account]," he said.

Companies already feeling effects

Even before El Niño's peak, agribusiness firms have already reported losses in production due to the weather phenomenon.

"We are affected by El Niño. Our yield has gone down," Del Monte Philippines Inc. (DMPI) senior manager Ramon Velez said in a text message to GMA News Online.

"Our plants and fruits are affected by less water," he added.

DMPL registered a net loss of $12.0 million in the first quarter of its fiscal year ending July, pulled down by the adverse effects of the El Niño. Most of the company's businesses are engaged in growing, processing, and selling canned and fresh pineapples, pineapple concentrate, tropical mixed fruit, tomato-based products, and other food products.

"The net loss was attributed to Del Monte Foods Inc.'s (DMFI) first quarter being seasonally weakest...The El Niño weather pattern also caused reduced pineapple supply in the group's plantation in the Philippines leading to lower exports," the company told the stock exchange in a filing.

"In response, we are employing agri solutions like mulching during plantation and drip irrigation during growing," Velez said.

Mulching is a procedure in which materials are placed over the soil's surface to maintain moisture for the tree or the plant, effectively lessening the amount of water needed. Drip irrigation is an irrigation system in which water is dripped at a slow pace to the roots of plants.

DMPL noted, however, that it looks to recover from its losses despite the worse conditions expected next year.

"We have successfully laid a solid foundation from which we will execute our growth plans in the coming quarters. Barring unforeseen circumstances, we look forward to a return to profitability in FY (fiscal year) 2016, which will generate more free cash flow to allow us to deleverage further," Joselito D. Campos Jr., DMPL CEO and managing director, said in the filing.

Likewise, agribusiness firm AgriNurture Inc. also noted a drop in production due to the drought.

"El Niño affected yield of our contract growers," executive chairman Antonio L. Tiu said in a separate text message.

The company's banana and pineapple production were among those hit the worst, Tiu noted.

"There is no exact figure but yield of crops were really low," he said. "However, we are aggressively expanding contract growing in less affected regions to mitigate risk."

Tiu said AgriNurture has opened up production areas all over Mindanao which are "catching up fast."

More destruction

The El Niño—a prolonged dry spell—is expected to cause much more damage to crops than the drought in 1997 to 1998.

"All key meteorological agencies state with relative certainty that El Niño conditions have been met and that its intensity will surpass the last destructive El Niño in 1997 to 1998," HSBC Global Research said in a Flashnote in October.

This might result in the country overshooting its inflation target by 2016 due to a disruption in the supply chain, HSBC Global said in an earlier Flashnote.

"A significant El Niño would put headline CPI (consumer price index) well over the 2-4 percent inflation target by 2016, ostensibly putting the BSP (Bangko Sentral ng Pilipinas) in a difficult position that could force it to hike rates sooner than expected," the report read.

Data from the National Economic Development Authority (NEDA) earlier this month showed that inflation hastened to 1.1 percent in November due to the increase in consumer prices of both food and non-food items. This is an increase from the 0.4 percent in October.

The latest figures brought the year-to-date headline inflation to 1.4 percent.

"Despite the uptick in November, average inflation will likely settle below the low-end target for the year. This will largely be influenced by the slump in global petroleum prices, along with other favorable supply-side factors such as the sluggish domestic retail prices of corn, oil, and rice," NEDA Deputy Director-General Rolando G. Tungpalan earlier said.

Tungpalan also urged the government to urgently implement the Roadmap for Addressing the Impact of El Niño (RAIN), saying that the "government should err on the high side in determining food import requirements in anticipation of El Niño to avoid food price spikes."

According to Tungpalan, food price rises will be very detrimental to the poor, who spend over 60 percent of their budget on food. — BM, GMA News