7/25/2019 A Looming Rice Crisis

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Looming Rice Crisis: Implications to Business

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Looming Rice Crisis: Implications to Business

At a Glance:

While the Department of Agriculture is denying there is a

rice shortage, the empirical evidence at the ground shows that the staple

food of the Filipinos is fast disappearing in the market while

prices of available stocks are rising. Commercial rice now sells

as much as P34.00 a kilo (approximately US$ 0.85). The

National Food Authority (NFA) rice, which is the cheapest at P18.00

per kilo, is about to be increased to at least P25.00, pushing the prices of

commercial and imported rice even higher.

The price of pan de sal (ordinary bread) had just increasedfrom P2.00 to P2.50 per piece, due to the higher cost of imported wheat.

Fuel prices are also on the rise. Premium gasoline is

expected to hit P50 per liter by May.

Demand for higher wages is as pressing as ever. While the

Department of Labor and Employment (DOLE) has yet to receive formal

petitions from the unions, they are already studying the possibility of

incorporating the P50 allowance to the minimum wage and granting an

additional increase of no less than P12.00.

Ination rate for the 1st quarter of the year has gone up to 6%,

according to data from the Central Bank.

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The Culprits:

The country has not been self-sufcient in rice since

the mid-1960s, after which we have had to import the

cereal, year after year after year, an average of 800,000

metric tons of rice since 1996. In 2007, the Philippines

became the biggest rice importer in the worldwith 1.8 million metric tons importation, a shameful

distinction since the Philippines is host to the

International Rice Research Institute (IRRI) in

Los Banos, where agriculturists from all over South

and Southeast Asia have learned the most modern

technologies for growing rice.

Compounding the Philippine food problem is

overpopulation. It is producing more children faster

than it can grow the food to feed them.

Furthermore, converting millions of hectares of

farmlands from food crops to bio-fuel crops

sugarcane, rapeseeds, jatropha trees, etc has

reduced food harvests worldwide as well as locally and

has consequently raised the prices of food staples.

The governments failure to provide technical support

for the farmers.

The governments program on food security that is

based on importation the government has allocated

P2.5 billion for domestic production and P10 billion to

P14 billion for importation.

Government Response:

The National Food Authority started selling rice in one-kilo bags, instead of

by the 50-kg sack. The Arroyo government is toying with the idea of directly

selling rice in depressed communities to thwart attempts of speculators to

cash in on government rice subsidies.

Upon arrival from Hong Kong last April 1, President Arroyo convened the

Cabinet right at the Ninoy Aquino International Airport during which she

nnounced that she was authorizing the use of P5 billion to subsidize the

countrys rice farmers and ensure a steady supply of the cereal.

She also said that local government units can tap the P32 billion budgetary

surplus to encourage rice production.

President Arroyo also raised the farmgate price of palay from P12 per kilo to

P17 per kilo, a signicant 42 percent increase.

Tariff on r ice impor tation has been removed. At the same time the

government itself through the NFA plans to import 500,000 metric tons of

rice at $1,000 per ton with an estimated $1.3-billion loss calculated based on

the difference between the import price and selling price. The government

aims to import 2.6 million metric tons of rice in 2008, 44 percent

more than in 2007, to build up stocks and prevent shortages.

President Arroyo has enlisted the support of the Roman Catholic Church

through the Catholic Bishops Conference of the Philippines (CBCP) in the

distribution of subsidized rice to the poorest of the poor, especially in Metro

Manila.

The budget for family planning is being increased this year from P200

million to P2 billion, of which P800 million will be used for an

education-information campaign to help couples decide which method

of birth control they will adopt; and P1.2 billion will be used for condoms and

birth control pills that are medically and legally permissible, for

free distribution to poor families.

...PHILIPPINESBECAME THE

BIGGEST RICEIMPORTER IN THE

WORLD WITH1.8

MILLIONMETRIC TONS

IMPORTAT ION...

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Prognosis:

Arroyo fears hungry voters would take to the streets if rice

shortages were to emerge, and has taken extraordinary stepsto guarantee sufcient supply but her public moves have helped

increase prices, encouraged hoarding, and stoked anxiety.

The steps being undertaken by the Arroyo government are for

the short-term. Clearly, it will have an adverse effect if the

long-term solutions are not acted upon.

It is not clear if this increase in farmgate price is part of the

P5 billion subsidy announced early April. But it can be said with

condence that the positive feelings that this series of moves

was meant to generate is tempered with fears that this newbonanza to rice farmers may also be a bonanza for the

embedded crooks in her biological and ofcial families. The

looming rice crisis has not diverted the issue of corruption

but instead exacerbated it.

While it takes at least three (3) months to plant and harvest

rice, long=term solutions should be put in place. One of these

is the use of technology. Less than 1 percent of Filipino farmers

use tractors and power tillers. Only ve bags of fertilizer from

the recommended eight per hectare are being used. Only

15-20 percent of total harvests, 65 percent at post-harvest

level, are recovered due to lack of mechanization. Theseresult in a low productivity of around 3.5 metric tons per

hectare, making the Philippines one of the lowest

producers in Southeast Asia.

The lack of support is worsened by the existence of a rice

cartel and unscrupulous traders and government ofcials whomanipulate stocks and prices, as well as previous scandals,

such as P729-million fertilizer fund scam, whose

effects are now being felt.

Implementation of the moratorium on land conversion is also

called for. Executive Order No. 363, issued in 1997, specically

bans the conversion of irrigated and irrigable rice lands.

While the business climate remains stable up to this point,

there being no food riots like in other countries, rising wages

and ination rates will make doing business in thePhilippines a bit more expensive.

For sure, the Arroyo government will do everything and use

whatever resources under its power and disposal to avert

the looming rice crisis. Empty stomachs make be the last straw

that could shake the dormant people from

their lethargic and apathetic state.