Farmers Cry Out
By Gee Pastor
IN less than two weeks, we Filipinos will once again cast our votes. By this time, we
should have thoroughly studied the candidates' platforms to see if these are really feasible.
I consider myself a farmer-accountant by profession and farmers, in particular, want
drastic changes to government policies and procedures. We are hoping that the incoming
administration will address minimal agricultural subsidies, extreme weather events, costly
farm inputs, high petroleum prices and even thievery. Making things worse, prices of
agricultural produce, especially rice and corn, have been kept relatively low for years.
In its simplest sense, agriculture is the cultivation of plants and livestock for consumption.
As defined under Philippine Accounting Standards (PAS) 41, however, agriculture is the management
by an entity of the biological transformation of biological assets for sale into agricultural
produce or additional biological assets. Agricultural produce is the harvested product of an
entity's biological assets. The processes of growth, degeneration, production and procreation
that cause qualitative or quantitative changes in a biological asset are referred to as
biological transformation.
The application of PAS 41 has always been a challenge, especially in measuring biological assets,
both at initial recognition and subsequent measurement. This is because the standard presumes
that fair value can be reliably measured for most biological assets. But looking at the Philippine
scenario, especially with the rice and corn that I'm familiar with, market prices or even
alternative fair value measurements are clearly unreliable.
PAS 41 prescribes the accounting treatment, financial statement presentation and disclosures
related to agricultural activity. It accounts for biological assets, agricultural produce at
the point of harvest and government grants related to those biological assets. Agricultural
produce is measured at fair value less estimated costs to sell at the point of harvest.
Most farmers, if not all, do not apply PAS 41 mainly due to the volatility of market prices
where fair valuation is a challenge. Most usually measure biological assets at cost (which is
allowed) less accumulated depreciation and impairment losses. Others use the cash basis of
accounting, especially since most of our farmers lack awareness and formal accounting education.
I spoke with farmers in Cagayan and Isabela and asked them about their perspective. Here's what
I learned: they borrow money from traders, taking the risk that the latter will buy their
produce at a lower price than the already low fair value. Others are afraid to continue farming
because of the huge risk they are taking, especially during severe droughts (which happened
last year) where recovery is almost zero.
Currently, an ordinary farmer's average monthly earnings for rice or corn is approximately P3,000
to P3,750 per hectare or around P20,000 to P25,000 per cropping. This is mainly due to low
farmgate prices. The farmer's labor and borrowing costs aren't even factored into the profit
or loss calculation.
Along with the constant rise in fertilizer and petroleum prices, farmers also have to constantly
deal with extreme weather. In Cagayan Valley and in certain parts of Luzon, they sustained
significant losses in 2020 and 2021 due to droughts and typhoons. Farmers are also being
victimized by thieves — I know someone who had 23 sacks worth of rice stolen while the grains
were being dried.
It is unfortunate that agriculture, for rice and corn farmers, is more of a gamble nowadays.
Even more unfortunate is that most farmers are trapped in this situation as they only know
farming as a source of livelihood. They continue to hope for government intervention to rescue
them. More attention is needed in terms of support, at least for subsidies, farm inputs and ways
to stabilize prices.
Who knows? Maybe in the next six years farmers will finally apply PAS 41. This, of course, is
in the context that they secure more profitable agriculture endeavors so as not to add crop
accounting to their already heavy burdens.
Gee A. Pastor, CPA, JD is the quality assurance review manager of Paguio, Dumayas & Associates, CPAs (PrimeGlobal Philippines),
and a member of the Acpapp board of directors. The opinion of the writer does not
reflect in any way the opinion of PDAC.
Source: Farmers Cry Out - Manila Times