V1 1st ISSUE

Looming Rice Crisis: Implications to Business

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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 increased
from 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.
Inflation rate for the 1st quarter of the year has gone up to 6%,
according to data from the Central Bank.

Looming Rice Crisis: Implications to Business

K&&hi>HHJ:

The Culprits:

Government Response:

The country has not been self-sufficient 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 world
with 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.

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.

Compounding the Philippine food problem is

overpopulation. It is producing more children faster
than it can grow the food to feed them.

President Arroyo also raised the farmgate price of palay from P12 per kilo to
P17 per kilo, a significant 42 percent increase.

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.

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.

...PHILIPPINES
BECAME THE
BIGGEST RICE
IMPORTER IN THE
WORLD WITH
1.8
MILLION
METRIC TONS
IMPORTAT ION...

Tariff on rice importation 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.

K&&hi>HHJ:

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Prognosis:
Arroyo fears hungry voters would take to the streets if rice
shortages were to emerge, and has taken extraordinary steps
to guarantee sufficient 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
confidence that the positive feelings that this series of moves
was meant to generate is tempered with fears that this new
bonanza to rice farmers may also be a bonanza for the
embedded crooks in her biological and official 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 five 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. These
result 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 officials who
manipulate 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, specifically
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 inflation rates will make doing business in the
Philippines 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.

K&&hi>HHJ: