Originally, hikes in the price of fertilizer were simply a problem for farmers, but the ensuing controversy has made the public question the competence of President Ma Ying-jeou’s (馬英九) administration.
We are afraid that this is not something that can be solved by agricultural economic models or economic analysis alone; these means will not calm the fury of farmers in the short term.
The new government announced an overall increase in fertilizer prices immediately after it took office, following domestic fuel price hikes. This has caused commodity prices to rise as purse strings are tightened.
While people suffer from the price hikes, the prices of domestic agricultural produce have failed to fully reflect production costs. In addition, recent torrential rains in central and southern Taiwan have seriously damaged leafy vegetables in certain areas, and farmers have been hard hit.
Even though the government has agreed to subsidize 70 percent of the price increase for chemical fertilizers, the adjustments have still aggravated the pain of the farmers and as a result triggered widespread discontent.
In relation to the complementary measures, newspapers reported that this proportion was decided upon because Taiwanese farmers use too many chemical fertilizers — more than 30 percent greater than the amount used by other countries — and that this has a negative impact on the productivity of farmland. The Council of Agriculture therefore hopes that the 30 percent rate will encourage farmers to reduce the use of chemicals.
Although this outcome is a result of the balance between external pressure and domestic policy imperatives, even so, the unsoundness of production and marketing and the prices of domestic agricultural produce have long failed to fully reflect costs, as farmer wages are low.
With the price of fuels, fertilizers and pesticides continuing to rise, the average annual income of each farming family is only NT$170,000 — not enough to sustain a household.
Therefore, based on practical concerns and the need to prevent abuse of fertilizers, the 30 percent payment should decrease to between 10 percent and 15 percent to relieve the burdens of farmers. The difference could be covered by the revenues of Taiwan Fertilizer Co (台肥).
Fertilizer prices in other countries are much higher than in Taiwan. So why don’t farmers overseas protest? The key issues are the price of agricultural produce, foreign government protection, the effectiveness of farmers’ associations and research and development.
In Japan, for example, the price of fertilizers, pesticides, farm machinery fuels and feed is higher than in neighboring countries, but the price of its agricultural produce is also relatively high.
Two luxurious mangoes grown in Japan’s Miyazaki prefecture were sold in Taiwan for NT$5,688 (US$187). Naturally, such high prices can boost the income of agricultural producers. The average annual income of Japanese farmers was as high as ¥5.02 million (US$46,450) in 2005, including agricultural income of ¥1.235 million and annual pensions of ¥3.431 million. The figure is higher than that of Taiwan, and affords Japanese farmers a stable lifestyle.
The factors behind the high prices of Japanese agricultural produce include better quality control and the general compliance of farmers to pesticide regulations. Consumers are therefore willing to pay more.
In addition, because Japanese interest groups have heavy influence over parliament, the country itself has one of the highest levels of protection for agricultural produce, with measures that are mainly reflected in customs duties and government subsidies. While the latter increases the government’s burden, it is still feasible to support the industry, which accounts for a mere 1 percent of the nation’s industrial presence.
Further, the effectiveness of farmers’ associations is beneficial to agricultural production. Material purchases, produce sales, price negotiations and concrete policy benefits: all issues are negotiated through farmers’ associations. Perhaps Taiwan’s farmers’ associations and agricultural groups can consider playing a similar role.
As for the abuse of chemical fertilizers, this not only increases production costs but also decreases productivity.
For the last decade, the Japanese government has carried out research and development in chemical fertilizer conservation techniques and alternative fertilizers, thus encouraging farmers to use various organic, slow-release or labor-saving fertilizers, while largely lowering reliance on the chemical alternative.
In Taiwan, because agricultural environments and development emphases vary across the country, the central government should give up its dominance and grant more rights and responsibilities to local governments so that they can implement policies in accordance with local performance and development needs.
The push for any policy relating to the public interest should be carefully planned and complementary measures proposed. The government should also refrain from implementing measures that do not achieve a consensus to avoid possible discontent.
The troubles today have been brewing for quite some time. To achieve the goal of increasing the average annual income of farmers to NT$1 million, the government has to resolve the fertilizer dispute and prepare for possible crises in typhoon season. Moreover, it needs to commit to reform and adopt new strategies.
Lee Wu-chung is an academic. Chen Yu-hui is a professor in the Department of Agricultural Economics at National Taiwan University.
TRANSLATED BY TED YANG AND EDDY CHANG
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