AGRICULTURE.

The campaign against rinderpest has been prosecuted with unceasing vigor and its results are everywhere apparent. This disease is no longer a factor in the industrial economy of the Islands. It still exists, and in widely separated territory, but there are comparatively few cases and their number is constantly decreasing. From time to time outbreaks occur, but so far there has been no difficulty in controlling them, and I confidently expect that an end to the scourge of this disease, which has wrought such destruction to the prosperity of the Philippines, is in sight. The time has not yet come when we can in any way relax our efforts in combating the disease or reduce the present force engaged in the work; but if next year's progress is as satisfactory as that of the present year, a reduction should then be possible.

The chief danger now is the possibility of reintroducing rinderpest from abroad. For many years the Government made little progress in its efforts to stamp out the disease, because cattle, coming almost without restriction to the Philippines from the China coast, constantly brought disease into the Islands and no sooner was one epidemic under control than another was reported. It was only when a proper quarantine of animals from ports harboring disease was put into effect that any real progress in the way of ending rinderpest was made; and the most stringent quarantine regulations must be kept in force and scrupulously observed to prevent the landing of infected cattle. Those under which we are operating at present are that cattle from territory exposed to rinderpest must undergo quarantine in the bay for a sufficient length of time to enable the veterinarians to determine beyond any reasonable doubt that the shipment in question is not infected, although we might well follow the lead of the United States and other countries in absolutely prohibiting the importation of cattle from diseased ports.

Too much praise cannot be given the provincial governors and other officials for their earnest coöperation in the work against rinderpest. Quarantines are restrictive and undoubtedly work hardship on the people. However, almost without exception, they have shown a disposition to coöperate when the necessity for the quarantine was fully explained to them.

In its work other than combating animal diseases, the Bureau of Agriculture has just completed the most satisfactory year of its existence. Our efforts now are not so much to conduct scientific experiments as to bring to the knowledge of the people the facts and information which have been collected. This Bureau will find its highest usefulness only when it is so thoroughly in touch with the people that it will encourage the farmer to raise two crops of rice a year rather than one, if two are possible; to double the output of his orange farm by grafting new and better varieties on his trees; to

sell his hemp for much more by using better methods of stripping; to increase the value of his copra by proper curing; and so on indefinitely. To do this work, which is of fundamental importance to the prosperity of the Islands, demonstration stations are being established throughout the Archipelago as rapidly as money and men are available. I believe that this work should be continued and extended so that we will have at least one demonstration station in each province, the employees of which will be in the closest relations with the agricultural life of the community. To this end there is requested this year a considerable increase in the appropriation for the Bureau of Agriculture and I earnestly recommend it to your study and consideration.

RICE SHORTAGE.

By the passage of Act No. 2076 the Government was last year authorized to import and sell enough rice to prevent the rice famine which threatened the Philippines, with the consequent exorbitant prices for this necessary food staple. Under this authority there were purchased 11,402,417 kilos, or approximately 11,400 tons of rice, at an aggregate cost of 1,715.552. This rice was distributed throughout the Archipelago and served to reduce the price of this staple from 9 to 6. The monetary loss to the Government from these operations was, exclusive of customs dues, #276,411, or, with these dues added, #459,470.

These steps proved so beneficial that, at its last session, the Legislature passed Act No. 2155 authorizing the Chief Executive to take such future action as might be necessary to prevent the price of rice from rising above a reasonable rate. The exceptional drought caused a partial failure not only of our rice crop but of that of the countries which ordinarily supply the Philippines with this commodity, and last March it was evident that unless the Government purchased rice from abroad the people of the Philippines would, during the latter half of the year, be unable to obtain their daily food. Accordingly, instructions were issued by the Chief Executive for the purchase of rice and so far there have been bought about 10,444 tons, of which approximately 3,162 tons have been shipped to various provincial points where a noticeable shortage existed. The balance is held at Manila and Cebu available for shipment as circumstances may require. The prices charged by the Government for rice this year have been in advance of those charged last year because the scarcity which I have mentioned caused a general advance in prices throughout the East.

These operations will undoubtedly be attended with some loss to the Government, but until our stocks have been disposed of it is not possible to say what this loss will be. It will, however, be negligible in comparison with what it would have cost the Islands in money and suffering had the people been unable to obtain their necessary food at a reasonable price.

One satisfactory circumstance in connection with the rice shortage is the widespread use of corn as a substitute food. Not only appointive but high elective Government officials did noteworthy work in encouraging the people to eat maize where rice was not available.

ECONOMIC CONDITIONS.

During the past twelve years there have been imported into the Philippine Islands more than 2,485,000 tons of rice, for which there were sent, largely in coin, to foreign countries a little less than #165,000,000. This, of course, is an exhausting drain on the resources of the Islands, and it is not now, nor can it for years be, offset by manufactures. To raise what we consume it will be necessary to increase our crops of grain in ordinary years between two and three hundred thousand tons.

There are in many parts of the Islands large tracts of the most fertile land suitable for the growing of rice or maize, which belong to the Government and which, up to this time, have never been cultivated. It seems to me that the Government might well engage in the development and cultivation of some of these areas. There are to-day many thousands of families engaged, as were their forefathers before them, in a hopeless struggle on small parcels of exhausted soil where they barely eke out an existence, contributing nothing to the wealth of the Islands. If they could be transferred from their present environment to these large, fertile tracts, their present negative influence upon Philippine progress would be changed and they would soon be contributors in their full share to the development of their country.

I desire to recommend to the thoughtful consideration of the Legislature a plan which attempts the development of some of these areas upon as large a scale as may seem wise, for the two-fold purpose of increasing the food supply of the Islands and of encouraging immigration of people from the more populous and sterile districts into those parts of the Archipelago where nature has been most bounteous in her gifts. Such tracts of land may be found in various parts of the Archipelago, some of the best of them being in the Island of Mindanao; and I would like to suggest what seems to be sometimes forgotten, that the Philippine Archipelago consists not of Luzon and the Visayas alone, but of Luzon, the Visayas, and the Moro Province. Tracts may be found within the Moro Province which are easily accessible, below the belt of severe storms, requiring no irrigation, where two crops of rice may be raised each year, and where, if such a station were established, the influence of the more northern Filipinos would soon become a dominant factor. Let it not be said that the Philippines are dependent upon the outside world for food. Let this great drain upon the resources of the Philippines cease, and relieve the congestion and the consequent poverty which prevails in certain parts of the Archipelago. There is yet remaining 116,000 in the

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so-called Congressional Relief Fund, which could well be used for this purpose if the Legislature shall determine that such a policy should be adopted. A considerable additional amount should be appropriated in order to give the proposal a real opportunity for success and to make the project of sufficient magnitude so that its beneficial results may be really felt.

I feel that this is a matter of great importance, the purpose being twofold; that of encouraging interisland migration and of providing a larger supply of food for the people. I request your earnest and thoughtful consideration of the matter.

RAILROADS.

Railroad construction has continued to progress steadily during the year in the Island of Luzon and the effect in stimulating industry and fostering production, especially in the copra-producing provinces, has been marked.

The Manila Railroad during the year has opened its lines to the following points: Candelaria, on the Manila line south; San Jose to Batangas and Batangas to Bauan, on the Batangas line; Pagsanjan, on the Calamba-Santa Cruz line; Rosales, on the Paniqui-Tayug line; Naic, on the Naic line; and South Aringay, on the Dagupan-San Fernando, La Union, line.

ABANDONMENT OF RAILWAY CONSTRUCTION ON THE ISLANDS OF

NEGROS AND PANAY.

After a thorough study of conditions in Negros our officials and engineers are conclusively of the opinion that at the present it would be highly inadvisable to permit the Philippine Railway Company to construct the railway proposed for that Island. It appears that the cost of construction would be approximately 8,500,000, with an annual interest charge of #340,000 which the company would probably not be able to meet and which the Government would consequently be called upon to pay. Similar conditions attach to that portion of the concession which provides for a railway from Dao to Batan Bay on the Island of Panay. The Philippine Railway Company is also of opinion that these two lines could not be made to pay for a long time to come and is ready to waive its concessions for them. Drafts of proposed laws to accomplish this purpose were submitted by the Committee on Railroads to the Assembly at its last session and will be found in its files as Assembly Bills Nos. 942 and 1057. I recommend them to your careful consideration, in order that we may not be called upon to meet this probable expenditure for which we would receive no compensating return.

EVIDENCES OF COMMERCIAL AND FINANCIAL ACTIVITY.

The following figures are interesting as showing the increase in trade with the United States since the passage of the Payne Tariff

Bill, 1909, the increase in trade with other countries, and the increase in both business and trade during the same period:

Business of the Philippine Islands upon which is levied a tax of

These figures show a total increase in the three years of #189,501,874 in trade and #424,202,962 in business in the Philippine Islands. When the Payne Tariff Bill went into effect it was believed that there would be a marked decline in the customs receipts owing to the free American market which would tend to cut into the foreign markets, from which alone goods are received on which customs duties are paid. The contrary has proved to be the case. Customs receipts have advanced steadily the past three years, amounting to 16,572,147 in 1910, #17,357,620 in 1911, and 18,695,295 in 1912. Not only do the merchants import more and more from the free markets of the United States every year but with increasing prosperity the purchasing power of the people has become so much greater that they can afford to increase their purchases of foreign dutiable goods.

REVENUES.

The customs receipts, which the Insular Collector of Customs at the beginning of the last fiscal year estimated would suffer a decrease of approximately a million pesos, in fact showed an increase of #1,271,452 over the previous year. The estimate of the Collector of Internal Revenue of an increase of about #600,000 over the receipts of the previous year proved very conservative, #1,189,669 being in fact the final figure for the increase in his collections. The total actual revenue for the fiscal year was #27,275,668.61 instead of the estimated #25,072,300.

Up to date, in the present fiscal year the revenues from both customs and internal revenue have shown a regular increase, the figures for the first quarter showing an increase in customs receipts of #1,200,284 over that of last year and the internal revenue showing an increase of $352,790 over the corresponding period of the previous year.