MANILA. Agriculture Secretary Arthur C. Yap has ordered the National Food Authority to keep the buying price of palay at P17 a kilo until December this year.

In a phone interview yesterday, Yap said this will give farmers the "profit incentive to plant more," and thus help further boost palay production to a record high of 17.3 million metric tons for 2008.

On April 2, President Gloria Macapagal-Arroyo had raised the farmgate price of palay from P12 to at least P17 a kilo, amid reports that farmers are not enjoying the benefits of higher palay buying prices.

The NFA buying price was also hiked to set a floor price and ensure that farmers make money from their produce - this means bigger profit for farmers and a greater motivation for them to produce more.

However, agriculture officials earlier said this buying price was only good until May.

Yap explained that by extending until December the period in which the NFA can buy palay at P17 a kilo will not only allow farmers to earn, but will also help them deal with the skyrocketing prices of farm inputs such as fertilizers and transport.

High crude oil prices, which hit $111 per barrel last March, jacked up freight and other transportation expenses. Meanwhile, fertilizer prices, according to the World Bank, increased by 150 percent over the past five years, significantly padding farm production costs.

"I have ordered the NFA to buy aggressively. If they can buy 10 percent of the local production, then it must do so," Yap added.

Over the past two years, the NFA has bought only one percent of the country's palay production. Last year, the palay production stood at 16.24 million metric tons.

NFA Administrator Jessup P. Navarro earlier said his office was still reassessing the target volume of palay that the agency would buy locally, given the increase in its buying price.

Navarro explained that the NFA did not have a hold on the volume of palay that farmers would sell to it. Farmers are free to decide whether to sell to the food agency or to traders who, most of the time, offer a higher buying price, according to Navarro.

Meanwhile, Yap said he will conduct talks with the Land Bank of the Philippines this week, if it can increase the credit line for farmers and farmer cooperatives at least twice or even thrice its current credit facility.

Last year, the Land Bank reported that it has extended to its priority sectors -- which include small farmers and fisherfolk, SMEs and micro-enterprises, among others -- a total of P96.6 billion in loans or about 71 percent of its total loan portfolio of P135 billion.

Of this amount, about P18 billion in loans went to small farmers and fisherfolk; P17.4 billion for agri-infrastructure projects of local governments; P13.7 billion for agri-business; and P13 billion for agri-related projects.

Yap added that they are also further exploring other kinds of partnerships with local and provincial government units to better and more effectively implement the DA's new intervention measures to boost farm production.