SOUTHERN PHILIPPINES AGRIBUSINESS AND

MARINE AND AQUATIC SCHOOL OF TECHNOLOGY,

MALITA, DAVAO OCCIDENTAL

RESEARCH PROPOSAL

The Impact of Inflation in Agricultural Crops

Dennis Lazarte

BACHELOR OF SCIENCE IN AGRIBUSINESS

July 2021
 CHAPTER 1

THE PROBLEM AND ITS BACKGROUND

Introduction

Inflation in Agricultural Crops is farmers will have cash flow issues as a result of this, which

will necessitate a high level of operational management and prudent financial methods. Individual

farmers may be able to mitigate the impact of rising input prices by increasing productivity and

cutting costs. Present competitive structures may however possibly result in accelerated input price

inflation if increases in productivity and economizing on costs occur for agriculture in aggregate.

The potential effect of inflation on the individual farmer, as well as on the farming sector as a

whole, is of the utmost importance for the survival and continued existence of both. This is further

illustrated by the accelerated nature of farming debt. Drought Conditions obviously aggravated the

situation, but, everything taken into consideration, agriculture is in difficulties. In this article the

effect of inflation on agricultural production under risk conditions is analysed. Attention is also

given to certain policy aspects which may arise in consequence.

Statement of the Problem

The fact that relative price movements are an essential part of the operation of a market

economy greatly complicates the task of measuring inflation. (If there were never any relative

price movements, measuring the change in the real purchasing power of a unit of money over time

would be extremely simple.) It also greatly complicates the task of trying to measure the extent to

which price inflation itself causes relative price movements. It is concerned with the question of

whether or not it is possible to derive a set of rules of behavior which would protect one from
potential harm from changes in the purchasing power of money or, better yet, insure that one

profits from changes in the purchasing power of money.

Significance of the Study

The result of this study will eroding the family farm ideal defined as an owner operator and

his family "responsible for providing most of the labor, management and capital for an economic

farming unit. A chief obstacle to the family farm ideal is obtaining sufficient capital in the face of

cash flow problems created by inflation. Devising imaginative credit systems to deal with the

problem constitutes one of the greatest challenges facing those in agricultural finance. Devising

appropriate management strategies for farmers in the face of cash flow and other financial

problems constitutes one of the greatest challenges facing farm management research and

extension.

Scope And Limitation of the study

The study will be intended during a period in which the rate of inflation is greater than zero

percent per year, we should not expect the money prices of all commodities to rise at the same

rate. We should not be surprised to observe the money prices of some commodities rising more

rapidly than the money prices of other commodities. Indeed, we should not be surprised to

observe the money,prices of some commodities actually falling during mild inflations. Relative price

movements are to be expected when the rate of inflation is greater (or smaller) than zero percent

per year just as they are to be expected when the rate of inflation is precisely zero percent per

year. This is not to deny that a positive (or negative) rate of inflation can itself cause relative price

movements. It clearly can and undoubtedly does cause such price movements.

Definition of Terms
Agflation - food prices rise more rapidly than the prices of other goods and services.

Graph – used to measure the cash flow issues 10 years back.

People – facing the cash flows and other financial problem.

Owner - responsible for providing most of the labor.

Market – to balance the prices.

CHAPTER II

REVIEW OF RELATED LITERATURE

 Impact of food inflation on poverty in the Philippines

Simulate the impact of food inflation between June 2006 and June 2008 on poverty across

different areas and between agricultural and non-agricultural households (Tomoko Fujii,2013). We

explicitly treat the spatial heterogeneity in food inflation and the differences in consumption and

production patterns across households by merging household expenditure survey and price

datasets at the provincial level or lower. Although some of the poor agricultural households may

have escaped poverty, the poorest of the poor, whether they are in an agricultural household or

not, are severely and adversely affected by the food inflation.

Spillover dynamics across price inflation and selected agricultural community

price

Their article contributes to the existing empirical literature by examining the spillovers

across price inflation and agricultural commodity prices for the case of Nigeria. To achieve this

objective, we employ the Diebold and Yilmaz (Int J Forecast 28(1):57–66, 2012) spillover index.

Subsequently, we examine the directional spillover, total spillover, and net spillover indexes.

Further analysis to capture cyclical and secular movements was addressed with 40 months of

subsamples via the rolling window analysis. Our empirical results, based on the monthly frequency

data from January 2006 to July 2016 show that the total spillover effect was about 75%. This

suggests a high interconnectedness of the selected agricultural commodity prices and inflation.

Further empirical findings shows that inflation, sorghum, soybeans, and wheat were net receivers

while cocoa, barley, groundnut, maize, rice were net givers. We find a negative net spillover for

price inflation, implying a net positive spillover from commodity prices to price inflation.

Agricultural commodity prices in recent times have been experiencing an upward trend in record
time (see Loening et al. 2009), since the 2006–2008 global food crisis. The spillover effect of the

global food price surge in 2006–2008 has left most economies with the high inflation rate, large

trade deficits and general poor macroeconomic environment especially in the developing

economies. The explanation to this phenomenon is worthy of investigation so as to provide

academicians, stakeholders and policymakers ample background as well as open opportunities for

investors (Balcilar et al. 2014). The quest to underpin the rationale behind agricultural commodity

price surge has been explored by several agricultural economists and interested researchers. Abbott

et al. (2009) posited that the key drivers of hike in agricultural commodity prices are found in the

huge synergy that exists among macroeconomic indicators. These indicators include oil prices,

interest rate, exchange rate, unemployment, as well as the gap between agricultural productivity

and increasing demand for food. Based on these outcomes, several inherent policy implications for

the government administrators, farmers, investors and all stakeholders abound. For instance, the

need for government officials to insulate the agricultural market from externalities for optimum

prices stability is pertinent.

Impact of Inflation and Government Agricultural Policies on Relative Price

variability of Cash Crops in Nigeria

Their paper investigated the impact of inflation and government agricultural policies on

relative price variability of cash crops in Nigeria using co-integration and ECM approach. The

analysis was carried out on time series data collected from 1970 to 2008. The result shows that

inflation has a significant positive impact on relative price variability in the short-run and long-run.
Polices like Structural Adjustment Programme (SAP), Post-Structural Adjustment Programme

(PSAP) and Green Revolution (GR) affected price changes that led to efficient re-allocation of

resources among cash crops in Nigeria. The agricultural sector is an important economic sector in

Nigeria’s economy. It plays an important role in rapid growth and development of Nigerian

economy (Famoriyo and Nwagbo, 1981). It provides food for the growing population, employment

for over 70% of the population, raw materials and foreign exchange earnings for the development

of industrial sector (Giroh et al, 2010). In spite of the predominance of the petroleum sub sector in

Nigeria economic growth and development, agriculture remains a major source of economic

resilience (Ojo and Akanji, 1996). However, the oil boom in the early nineteen seventies caused a

drastic fall in the percentage contribution of the agricultural sector to 35 per cent in the early

eighties. According to Okoh (2004), the export of crude oil now constitutes about 96% of total

exports. It is imperative to note that Nigeria once a leading exporter of several agricultural

products like Cocoa, Rubber, Palm Kernel and Groundnuts has lost her leadership position in the

exportation of these agricultural products (Mesike et al, 2007 ). It is therefore recommended that

long-run government agricultural policies should therefore be continued and also, policies that

would protect the agricultural sector from the impact of inflation in the short-run should be

encouraged. [Report and Opinion 2010;2(5):8-13]. (ISSN:1553-9873).

CHAPTER III

METHODOLOGY

Research Locale
 The study will be conducted in Southern Philippines Agribusiness and Marine and Aquatic

School of Technology (SPAMAST), Institute of Agricultural Technology and Entrepreneurial Studies

(IATES), Buhangin Annex, located in Barangay Buhangin, Malita Davao Occidental.

CITED LITERATURE

Tomoki Fujii, Impact of food inflation on poverty in the Philippines,Food Policy,Volume

39,2013,Pages1327,ISSN03069192,https://doi.org/10.1016/j.foodpol.2012.11.009.
(https://www.sciencedirect.com/science/article/pii/S0306919212001236)

Balcilar, M., Bekun, F.V. Spillover dynamics across price inflation and selected agricultural
commodity prices. Economic Structures 9, 2 (2020). https://doi.org/10.1186/s40008-020-0180-0

Mesike, C.S1 . Okoh, R.N2 , and O.E. Inoni2 Impact of Inflation and Government
Agricultural Policies on Relative Price variability of Cash Crops in Nigeria