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Apr 21

The Explainer: The Galloping Price of Rice

That was me! In a scene from “Papogi: The Imaging of Philippine Presidents,” a PCIJ documentary that came out in 2004.

Since the modern presidency began in 1935, presidents have obsessed over rice.

President Gloria Macapagal-Arroyo happens to be a chief executive with a better historical sense than most of her recent predecessors. After all,  the burden of history is particularly heavy on her shoulders.

She knows a rice shortage helped ensure her father’s victory in 1961-

And a rice shortage helped ensure that he went down to electoral defeat in 1965.

She therefore knows that food is the ultimate political question.

The Explainer gave you the science of it last week. This week, we’ll look into a little of the history, the politics, of food shortages; and even the economics not just of the rice problem, but its accompanying problems, as well.

I’m Manolo Quezon.

 

I. The Politics of Palay

 

http://thewarriorlawyer.com/2008/03/30/the-politics-of-rice/#more-165

As one of my favorite bloggers, The Warrior Lawyer, recently put it, rice is a political commodity. Every administration, bar none, has been sensitive to rice prices and rice supplies.

http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20080328-126864/IRRI-RP-rice-harvests-double-that-of-Thailand

After all, a recent report, quoting the International Rice Research Institute in Los Banos, points out the Philippines has imported rice almost every year since 1869, far more recently than say, Java, Indonesia’s most populous island, which has been an importer since the 16th century!

And every administration has tried to attend to this shortfall in rice supplies, by bureaucratizing it.

The NARIC, or National Rice and Corn Corporation, was established in 1936.

It became the BIBA, or Bigasan ng Bayan during the Japanese Occupation. When Manuel Roxas had to decide how he’d deal with the dilemma of having to serve in the government during the Japanese Occupation, he decided the best way would be to take charge of the Bigasan ng Bayan.

Recently, Chief Justice Puno gave the inaugural lecture for the  three-year presidential lecture series organized by Upsilon Sigma Phi at UP Los Banos.

His lecture was on Jose P. Laurel, and in it, he quoted this exhortation made by Laurel to rice farmers in August, 1944. Pat?

“the government, while recognizing your right to live, imposes upon you the obligation to help your countrymen in the same way that you will be helped so that not only you may live but also all your countrymen.”

-Jose P. Laurel, August, 1944

 

Puno pointed out that with skyrocketing inflation, Laurel also created special courts to try profiteers, increased penalties for those who unjustly increased prices and raised government salaries.

This is, actually, about all that governments can do, when faced with the law of supply and demand.

Then, after the war, our rice and corn authority was known as  NARIC again.

In 1948, by which time Manuel Roxas was President, people had already begun to point out the problems that arise when government creates bureaucracies to solve problems.

Everything politics touches seems to turn into mud.

http://philippinesfreepress.wordpress.com/2008/04/05/the-hand-of-the-government-april-10-1948-2/

Pat, could I ask you to read something written 60 years ago, by Teodoro M. Locsin in the Philippines Free Press?

In a private business, inefficiency is punished by ruin, so the employee who idles and loafs is canned. The manager must know his business—or else. It is not so in a government corporation.

 

In a government corporation, appointment to the most responsible position is dictated first by politics, secondly and incidentally by qualifications. A government corporation is the natural home of lame-ducks. The dumber you are, the better. Independent thought is subversive, imaginative planning is the quality of a man who can think for himself—a dangerous man, one to get quickly rid of. The dumber you are, the better…

… NARIC did not exactly make a name for efficient administration, and the Philippine National Bank will be lucky if it got back half, or even a fourth, of its crop loans, whose exact amount it is afraid to tell the people for the people might die of shock.

 

And nobody gets fired.

-Teodoro M. Locsin

 

There’s a saying you all know –the more things change, the more they stay the same.

Sometimes, President try to reinvigorate the bureaucracy by renaming agencies. And so, Naric became the National Grains Authority under President Marcos and then he rebranded it once more as  the NFA or National Food Authority in 1981.

http://asiafoundation.org/in-asia/2008/03/26/soaring-world-food-prices-exacerbate-challenges-across-asiaespecially-in-the-philippines/

In a recent article on the Asia Foundation blog, Bruce Tolentino and Thupten Norbu pointed out that what sets our government apart from the governments of other developing Asian nations, is that we’re the only country that continues impose a state monopoly on the international trade of rice.

The NFA could buy rice at relatively low prices abroad, and then sell it at home at prices that were, on average, double that of the world rice price.

With rice prices going up and up, our government now has to pay more and more. That is, if it can even still buy by-and-by.

Remember the news that the President made a personal request to the Vietnamese Prime Minister, to guarantee us 1.5 million MT? But worried about its own rice harvests, Vietnam says it can only commit to 1 million MT.

More recently, the government announced it intended to buy…. But so far, has only obtained commitments to fill ….

So the headache is this: an inefficient, corruption-filled organization, the NFA, which has always lost money, has to lose more money, with no guarantee that it can even meet demand, which keeps going up.

As Tolentino puts it, Pat?

NFA is already one of the largest drains on the fiscal resources of the country, since it borrows commercially to finance its imports. Furthermore, the NFA’s borrowings have traditionally carried the sovereign guarantee of the Philippine government. Can the vulnerable fiscal status of the economy bear this additional burden, or will the fiscal strain finally lead the government to abandon the NFA’s monopoly?

http://www.manilatimes.net/national/2008/apr/02/yehey/top_stories/20080402top1.html

This is where the politics of Palay comes in.

http://www.asiasentinel.com/index.php?option=com_content&task=view&id=1127&Itemid=32

The Asia Sentinel tells us there simply isn’t enough rice being grown, for a growing global population. Because of this, normally rice-exporting countries are pressured to limit exports, to ensure they feed their own people; this makes prices higher, which adds pressure on governments as rice growers get irritated with the political requirement of governments to keep prices low, while rice growers see rice prices going higher and higher overseas.

The President, faced with this reality, has to attend to many sectors all pulling in different directions.

Take a look at these interesting charts from Inquirer.net’s special section, The Rice Problem.

As you can see, the margins of retailers, the shopkeepers from whom you buy rice, is pretty small.

The big gap is between what the farmers charge, and the margins made why wholesalers.

Now is this gap pure profit?

That’s what we all assume.

But bear in mind that it’s the wholesaler who gets the rice from the farms to the shops; and part of that big orange gap, might just be the inefficiency of our national transportation system –including the expenses of shipping and trucking all that rice around.

But you and I depend on government to make sure that orange gap isn’t obscenely big.

But just as in past administrations, it’s not just the price of rice alone everyone has to contend with. The prices of everything are going up. What does that mean for us?

We’ll look at that, when we return.

 

II. The “Great Fear”

 

That moment, fictionalized in the film “Marie Antoinette,” is what gives political leaders the heebie-jeebies.

Here is a self-portrait by the French painter, Jacques-Louis David.

In 1792, he watched a woman being taken to have her head chopped off, and rapidly drew a sketch of scene:

That woman was Marie Antoinette, formerly Queen of France.

Her last minutes as recorded by David was far cry from the French Queen’s heyday.

Peasants and politicians despised the Queen for responding to public hunger by saying, “let them eat cake.”

We now know she never, ever, said this. This book, on the relationship between Louis XVI and Antoinette, even details how public hunger led them to sell the royal silverware to buy bread for the poor.

But everyone assumed she made that crass comment at the time and it’s that assumption that counted –when her husband’s regime was at stake, and later when her own life was on the line.

The last, pathetic moments of Marie Antoinette were brought to mind by two things. What an official said, and what a columnist wrote.

http://newsinfo.inquirer.net/breakingnews/nation/view/20080324-126157/I-never-told-Filipinos-to-eat-less-says-agriculture-chief

Just as the fake but immortal line “let them eat cake” led to Marie Antoinette’s being guillotined, the quote, “let’s eat less rice” has come to haunt our Secretary of Agriculture, who suggested fastfood restaurants serve less rice to customers.

The damage was done to Marie Antoinette and now Arthur Yap is being compared to her though he doesn’t even wear fancy dresses.

But the truth is, we do eat more rice. A recent Inquirer editorial:

http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20080407-128819/High-food-prices-to-stay

Pointed out that per person, we consume more rice than ever before. Pat?

In 1990, per capita consumption of rice was at 92.53 kilos a year; in 2000, 103.16 kilos; in 2007, 118.70 kilos. A 15-kilo increase in per capita consumption meant an additional 1.275 million MT in consumption.

Add to this, there are more of us than every before. Pat?

In 1990, the Philippines’ population was 60.7 million; 76.3 million in 2000; 82.6 million in 2004; 86.2 million in 2006; 88.7 million in 2007; and 90.4 million in 2008.

Which brings us to what a columnist, Bong Austero recently wrote.

http://bongaustero.blogspot.com/2008/03/averting-impending-rice-shortage.html

On, Bong Austero wrote this column and Pat, I’d like to ask you to read an excerpt from March 24 of this year:

[A] sister intimated over the phone last week that she and her family had been buying rice since last month, she feared that the heavy rains that have plagued Eastern Visayas in the last two months have affected this season’s crop. The yield from this season’s harvest will be less compared to last season’s. She said … most people she knew—all of them rice farmers—had also been buying rice.

…Traders smell a rice shortage and are cornering up a large part of this season’s harvest. I smell trouble. Big trouble. Traders seem bent on hoarding this season’s harvest. A shortage is indeed in the offing.

But rice is booming in Panay: the same rains from La Nina that got Bong Austero’s sister worried, has made possible three instead of two rice crops in Panay.

We know the weather affects food prices and that food prices affects the stability of governments. But at worst, we’re being told that things will be tough not for ever, but for a couple of months.

Government says we only have to deal with a shortfall in supply until July. After that, we can look forward to some good news.

According to the the UN Food and Agriculture Organization (FAO) just on April 2, global rice production is expected to increase by 1.8 per cent – or 12 million metric tons – this year, which will relax the tight supply situation in key cultivating countries: like Vietnam and Thailand, from whom we import rice.

So with all the things government’s doing, why are people still panicking?

To understand this, let’s go back to Revolutionary France.

A mini ice age, historians tell us, led to failures in the wheat harvest and a rise in bread prices that provided the spark for the French Revolution in 1789.

The result of the wheat and bread shortages is where we got the title for this segment: “The Great Fear.”

As chronicled by John Markoff in one essay in this book, “The Rise and Fall of the French Revolution,” the great fear was paranoia in the rural areas, as a political crisis engulfed France, rumors began to spread that the King, bandits, merchants, what have you, were going to swoop down on farmers to take their grain.

The farmers formed militias; urban residents panicked. The government panicked. It’s this combination of a natural problem leading to unnatural behavior –because of a natural fear of hunger, that turns into an out-of-control situation.

And it’s not as if history doesn’t give governments known for inefficiency and corruption not to worry.

Well, let me ask you to read something from this book, Pat.

This is a novel by Carmen Guerrero Nakpil, which appeared in 1990 but has a strangely contemporary ring to its title today” “The Rice Conspiracy.”

A Russian is talking to a Filipino, comparing historical notes. Pat?

“Did you know hunger played a big role in the [Russian] Revolution in 1917?”…

“I do. And in yours of 1896. According to my readings… Filipinos endured oppression for four hundred years although of course they revolted regularly… But in 1896 the crops failed so badly that the Katipuneros of Manila simply had to take up arms. It was that or starvation.”

In normal circumstances, governments can shrug off low survey ratings, but when people get frantic, a government needs a reservoir of good will –and a measure of public trust- to get the public’s cooperation.

But let’s round up this portion with a sneak peek at a presentation by Thads Bentulan, whom some of you might remember as a former columnist of Business World.

He took a look at rice prices here and in Hong Kong, and asked, how many minutes, based on the minimum wage, does it take you to earn enough to buy a kilo of rice.

So you work more, to buy less. This sours your mood. And you want more. As yesterday’s Inquirer editorial warned

http://opinion.inquirer.net/inquireropinion/editorial/view/20080420-131644/Immediate-need

We have a new problem. Raising salaries without thinking ahead, endangers the pretty slim margins companies are, on the whole, making at present.

We’ll ask that, when we return.

 

III. Interview

 

Our guest helped write this report, published by the Global Property Guide, which you see on your screen right now.

We’re going to take a look at a couple of charts from that report. The price of rice is going up with everything else; and chances are, if you’re watching us tonight, you own a home; there’s even a chance you’re involved a line of work that involves housing, since construction is one of the engines of growth for our economy.

First, this one:

So what does this tell us?

 

My View

 

Just a week or so ago, the IMF cut its 2008 outlook for global economic growth for the second time this year. Global growth is expected to reach 3.7% in 2008 – down from the 4.1% forecasted last January. The World Bank, Asian Development Bank and UN have lowered their growth forecasts for Asian economies, warning that growing inflation from food and energy prices might take its toll. We will all have to tighten our belts, and learn to share more.

But let me steak to you, briefly, about something that bothers me. There is an ethnic component at work here, a very old one.

It’s this: when supply doesn’t meet demand, blame the Chinese, because there’s nothing more politically useful than blaming the Chinese for criminality.

But let’s be aware of racism. We have to face the reality that there are rice cartels and that they’re adding to the problem. But being Filipino Chinese is not the problem.

 

 

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