As chronicled by John Markoff in one essay in “The Rise and Fall of the French Revolution (Studies in European History from the Journal of Modern History)” (University of Chicago Press Journals) “ the Great Fear was paranoia in the rural areas, as a political crisis engulfed France in 1789. 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.
We are experiencing our version of the Great Fear. A vicious cycle involving dramatic moves by the government, magnified by a media out of any really big stories (NBN-ZTE, Spratleys, etc. all fizzled out by Holy Week) and the combination of the two brought out panic combined with opportunism on the part of the public. Its early glimmerings were reported by Bong Austero in his March 24 column, Averting the impending rice shortage.
Yesterday, the Inquirer editorial, Hoarding, pointed to the Great Fear among local governments (For background, see: Davao will hoard rice, and Bumper rice harvest expected in Mindanao and Govs of provinces in Panay say rice enough for Visayas and Panay has enough rice to feed entire Visayas and
My Arab News column for the week is Fixing the Rice Problem Leaving Others Unattended. Since the modern presidency began, presidents have obsessed about rice: and cultivating rice, literally, has been an image eagerly cultivated by our presidents. See The Presidency as Image, in the PCIJ.
In my Arab News column, I pointed to inflation as one of the unattended problems, and to get a better view of that problem, and other related ones, see this analysis in Global Property Guide: Gloomy days ahead for Asia’s housing markets. Two charts from that analysis are particularly relevant:
The in-house economist of Global Property Guide, Prince Christian Cruz, was the guest on my show and he had some interesting things to say. The rising price of oil last year already put pressure on income, but was offset by the appreciation of the Peso. However, with the rise in rice prices, Filipino families have been subjected to a double whammy and thus, rising inflation. See also Gov’t to cut growth target for 2008 Rising food prices to curb GDP expansion.
Government data says the top three expenses of Filipinos are food, transport, and rent (more or less in that order, but food always being at the top, and ranging from 40% to more than 50% of income expenses), so a rise in oil and rice prices bloats the three, and from his perspective (focused on the property market) this will mean families have to consider moving to cheaper accommodations or defaulting on their housing loans; and that’s only from the point of view of the domestic economy. Add to this a downturn, economically, overseas, and the problems increase, as Filipinos overseas have to set aside purchasing homes (which fuels the construction industry) as their families at home have to spend more for food, transport, and rent…
The other week, I asked a worker how prices had been affected since Holy Week. A serving of vegetable viand went from Php15 to Php25, for meat dishes, Php30 to Php40, a cup of rice from Php7 to Php14.
People have had to adjust their grocery budgets, which up to now had been fairly stable for a few years. See Opinionated Banana:
If UN has an emergency food summit, well our Household also had our own emergency food summit. My mother, who’s in charge of the hardcore accounting and shopping shared that before a sack of sinandomeng rice would just cost at around 1,400-1500 pesos, but as soon as the crisis hit the fan, she ended up paying for 2,000++ pesos for a sack. With just a couple of male species and one diabetic in our household, we’re really not dependent on rice. But still, it calls for attention. We would experiment now on mixing food viands with mashed or baked potatoes, which I’m looking forward to, or develop our skills with cooking pasta. Yes, we’d still cook rice, but in smaller quantities now. It may result to healthy and positive effects, just as long as rice is still an option and not a form of deprivation. We’re all willing to adjust.
This leaves less money for the various service-oriented businesses that rely on people having disposable income. So the immediate problem, for now, is it’s not that there’s no rice to be had, but that purchasing rice is more expensive and won’t be going down in costs significantly in the long term. And we aren’t creating the kinds of stable jobs we need.
A backgrounder on where we were, prior to the Rice Problem hogging the headlines.
From Cielito Habito, PDI Talk.ppt and Michael Alba, economic briefing.ppt (see also philippine economic growth revised.pdf” I’ve snipped some slides. The white ones are from Alba, the colored ones, from Habito.
In 2006-2007, both were looking at the growth taking place in the country (being proclaimed as a new Golden Age by the administration, if you remember) and pointed to where it was really taking place, and where it wasn’t:
Alba had been pointing out that productive land was being lost to the booming property market, and what was worse was government wasn’t even properly keeping track of the development. Both he and Habito were also pointing to the dangers of lopsided growth, since the sectors growing weren’t labor-intensive (Habito pointed to the collapse in manufacturing-related jobs) and a fall in domestic investments, which would be magnified by a fall in foreign investments.
See also The Grand Deception by Perry Diaz. He calls the Palace to task for trumpeting its economic record, and how it brushed aside questions concerning the statistics and where the growth was taking place. He also zeroes in on smuggling as one issue that has hounded the administration -and which, I think, explains why public skepticism has hounded its every move in attending to the Rice Problem. In Thads Bentulan’s PPT, there’s a footnote (see the notation with the asterisk, below) where he raises the question of smuggling, because there’s a gap in the official statistics:
This actually came up during the Senate hearings before Holy Week, but the vacation prevented people from focusing on it. The discrepancy was between what the Philippines claimed was the value of its trade with China, and the values China itself declared. The Philippines claimed something like 8 billion dollars in trade while China said the value was 30 billion dollars. Immediately, during the hearing, some senators began asking if the discrepancy wasn’t a sign of smuggling. Although one senator later explained the discrepancy could be a case of arguing apples and oranges: the Philippine figure may be trade with the People’s Republic of China only, while the China figure may be “Greater China” including the PRC, Hong Kong, and Taiwan (and even the Binondo traders) but also revelatory of “technical smuggling.”
As it is, the rise in rice prices has led to demands for salaries to be raised, see Hefty wage hikes to spell economic troubles for RP–bank. Even the Inquirer editorial warned of the consequences of government allowing itself to be stampeded into raising wages: see Immediate need.
Which brings us to my column for today, which is Rice per minute. It discusses Thads Bentulan’s provocative An Analysis of Rice Prices in Three Countries: Hong Kong, Singapore, and the Philippines (as of April 20, 2008) . You can also download his Hyperwage Theory book.
People in business immediately dismissed Bentulan’s proposal: if it were adopted, one person texted me, “jobs will simply disappear.”
Bentulan says the minimum wage for a domestic helper in Hong Kong comes out to 18,637 Pesos per month. Ask yourself what work or position would pay a similar salary in the Philippines. Many people I encounter who are business owners complain that there are lots of jobs available -only, there are no Filipinos qualified to fill those jobs- but you have to wonder, the jobs remaining unfilled (mid-level managers, bookkeepers, etc.) are at salaries that makes it a competitive choice for a qualified person to seek employment overseas.
Moving on to the politics of it.
There is a novel by Carmen Guerrero Nakpil, which appeared in 1990 but has a strangely contemporary ring to its title: “The rice conspiracy: A novel”. What is interesting to me is how students from the UP School of Economics on my show last Tuesday asked if we really had a rice crisis or if it was a politically-manufactured scenario. They are not alone in being suspicious, see The Multiplication Table of The Jester-in-Exile from April 10:
My suspicion is this: the “rice crisis” is a fabrication, a scare tactic to draw attention away from the assaults on the squatter in Malacanang. With the public focused on this apparent rice crisis, the media will spend very little airtime on the motion for reconsideration that the Senate has filed with regard to Neri vs. Senate, on Jun Lozada and his plummetting visibility, on Atty. Harry Roque and the Quedancor issue, and the Magdalo officers’ conviction for coup d’etat, among other things.
Heck, I’m fairly certain that this rice crisis issue will be milked for what it’s worth, and then the public gets blindsided by yet another impeachment complaint decide to shield GMA.
This was tackled by Mon Casiple in Rice politics and governance:
Of course, it has been a policy of the government for sometime to import rice directly as the sole importer. In theory, it is supposed to sell the imported rice to small retailers directly. In practice, it is the cartels — with connivance from corrupt government officials — who divert these into their own control. A variation on this tactic is to substitute imported high-quality rice with local inferior rice.
The connivance — if not the direct hand — of government officials in rice smuggling from NFA warehouses is underscored by the dearth of direct rice smuggling from abroad. Somebody or somebody’s group is making a killing on the supposed “rice crisis” and the expected panic which drives prices still higher.
In the medium- and long-term, there really will be a rice crisis, as well as a general food crisis globally. At the same time, global rice prices will continue to rise as rice-producing countries increasingly curtail and secure the need of their own population. A lot of factors also contribute to this, such as high population growth, slow scientific breakthroughs, climate change, and higher per capita consumption.
However, in the Philippine case, a major factor is the short-sighted government policy definition of food security as consumer-oriented securing “food on the table. This policy contradicts the common-sense notion of securing your staple food through sustainable production. The illogical policy of tolerating population growth when it outstrips resources complements this disastrous rice trader-friendly policy. Failure to complete the land reform program and prevent land conversion schemes of prime agricultural lands also contributed their share to the government’s failure in achieving real food security.
P43 billion is a drop in the bucket and a palliative when seen against the backdrop of governance failure by successive administrations in the rice and food sector. The GMA administration shares some eight years of it.
As all this hot money goes out of the US, fund managers are looking for other places to put their money. And they’re going into commodities. They’ve seen how oil and precious metals have gone up and continue to go up. But with oil and gold hitting record highs, there’s a sense that the upside may be limited so they’ve focused on commodities that they believe could have a greater short term upside. And that means corn, wheat, soy, and rice.
Yes, there are real supply and demand factors driving up rice prices, but one must concede that a big chunk of the increases in the prices of oil, gold, and rice, are due to speculation on the international commodities markets.
As it is, in Cebu, at least, Rice prices start dropping. The decrease in prices being due to decisions by the traders, it seems, and not because of government’s intervention!
Frisco Malabanan, director of the Ginintuang Masaganang Ani (Golden Bountiful Harvest) Rice program, said that as of Tuesday, farm gate prices of wet palay in Nueva Ecija have been monitored at around P14 to P14.50 a kilo.
He said that commercially, this farmgate price should translate o about P30 a kilo of milled rice, lower than the current prices, which have been hovering around P32 to P34 a kilo.
Malabanan attributed the low farmgate prices of palay to the decision of traders to stop buying in the meantime.
“This may be a strategy for them to bring down prices of palay,” he said.
Some things on the chart above taken from The Rice Problem site: the wide disparity between the farmers’ price (light green) and what the wholesalers’ sell it for (orange); and the relatively small margins of the retailers (light blue).
The wholesalers, though, also need that wide margin because it represents the inefficient costs of distribution in our infrastructure-challenged country. But it also shows the opportunities for maximizing profits, for example, when NFA Rice is then mixed with commercial rice or repackaged entirely by wholesalers and retailers.
Back in April 9, Philippines Without Borders warned that since government, by its nature, is slow to act, by the time its policies actually start having an effect, it could screw up what should at least be a bonanza for our farmers:
Now, based on Business Mirror reports, its seems Malacanang is simply telling the private sector to import what is allowed under the minimum access volume (MAV)…. Crazy!
The fact is that the MAVs have been there all along and no one dared importing much lately simply because tariff is high (50%). Who would be encouraged to import rice that are already expensive in the world market and pay 50% on top of it, thus making the landed ones so expensive? If I’m the importer, I’ll wait for local prices to really move up the heavens before I even thought about availing of the MAVs. That’s what is happening now.
So the supposed policy pronouncement about “allowing the private sector to import rice” was a bogus one – a deception. Or probably it was real, only that government, as usual, simply backtracked, nay backslided. My goodness! Now, the private sector is saying they will only import rice at zero tariff, and given the government’s very slow decision making process, we might end up having those imported rice landing our shores when the farmers are already harvesting their palay. Some of them has actually started harvesting now. That will be tragedy.
We shouldn’t discount, too, as the effects of people being able to game the system, as smoke points out in Malthus got this one right:
You see, some well-off families have been gaming the system. When you reach a certain income bracket, people eat more often at restaurants than at home. For these people, the rice they buy is mostly for the house-help and the pets. Ironically, in the circles I know, these are also the largest purchasers of cheap rice. With most of these upper-income families employing at least two – up to six – house-help, they are able to buy more at those street side selling points.
First thing they do is they go quite a distance from where they actually live. When they find a selling point, the helpers line up with everyone else, only they are spaced about two-three people apart. Most of the time, they’re not noticed as strangers. But when they are, they just say they’re from so-and-so depressed community and that that place ran out of rice. They then give the sob story about having had to walk or travel far just to find rice. It’s clever, really. This story reinforces the notion that there is a shortage, and sets people a-twitter. In short order, they forget that their are strangers among them.
Once they get their quota of cheap rice, these helpers walk walk walk. Eventually, they all meet up, get in the re-conditioned van they use for going to the market and drive on home.
People would go to localities where NFA rice was being sold, even if they’re not from the area and not necessarily the target market of rice relief -the idea being a habit as old as the Japanese Occupation, which is to hoard when things are cheap and simply pull one over the authorities.
Roving rice-buyers aren’t just agents of the well-off. This is where having many family members -and idle ones- comes in handy: you can line up, anywhere, even far from home; and when supplies are limited per person, multiply the number of persons and you multiply the family’s total share. And the strategy is validated by events: even mentioning that the NFA may be forced to raise prices increases the determination of people to hoard now.
Politically, whether manufactured or not, the Rice Problem affords as many opportunities as it presents risks. See Manila’s Arroyo treads risky path with rice campaign. Amando Doronila takes a dim view, saying that Low credibility bodes ill for Arroyo riding out crisis. I’m not convinced the public mood will sour the way he thinks it will, or could. Definitely, as Mon Casiple says, in Malacañang 2010 hopes, the Palace will be sniffing around for opportunities -or trying to create them, as RG Cruz amplifies in an entry. Or, simply try to move fast to take advantage of any that may arise; more so, if it can claim credit for heading of an emergency. House to call Yap on P250-B plan setting the stage?
The Warrior Lawyer has a trilogy of entries, starting with The Politics of Rice then Rice Crisis Relegates the ZTE Broadband Scandal to the Background and On Corporate Rice Farming and Other Notes on the Rice Crisis . Which brings us to issues raised and some readings.
I. Government agricultural policy
Rice: a policy blind spot says Randy David. On the National Food Authority, see Soaring World Food Prices Exacerbate Challenges Across Asia… Especially in the Philippines in the Asia Foundation blog. See also The Bottom Seed: Notes on the Philippine Rice Crisis by Martin Perez.
Catarata said that in planting rice, farmers need to spend for one hectare at least P18,745: P900 for the rice seeds, P6,000 for 14-14-14 fertilizer, P4,900 for urea, P30 for the transport of fertilizer and P500 for chemicals against pests, and P6,415 for labor.
Catarata said that if the P1,080 for thresher and blower and P1,800 for irrigation fee is added, the total rice production cost of P21,625 will be shouldered by the farmer, who is able to harvest only 60 sacks of palay worth P28,800.
Because the farmer has to share one-fourth of his harvest, equivalent to P7,200, to the landlord, he stands to get only P21,600 as gross income. After deducting the production cost, she said, farmers end up with a loss of P25.
But this situation can only be compounded by what Ellen Tordesillas says is a Looming fertilizer shortage.
II. The World food situation
Earlier, Food crisis grows by Paul Krugman and then from Time.com: No Grain, Big Pain. From the Asia Sentinel, recently, Will Rice Depart from Asia’s Tables? The region’s most important food staple may be going into permanent decline.
See Let Them Eat Bio-fuels by Tony Abaya, and Biofuel not to blame for loss of rice lands — senator. He’s right, I think -but there’s the question of corn (and inefficiencies: it’s cheaper for hog raisers in Luzon to import corn from Thailand than to ship it in from Mindanao), which is being allocated for biofuel production.
The Arab News editorial, International Problem, says European farm subsidies have been very successful and advocates some sort of international body to manage subsidies for agriculture on a global scale:
Biofuels are not the root cause of the price hikes; they and the high price of oil are simply the straw that broke the camel’s back. The real villain is the phasing out of subsidies in so many parts of the world at the behest of the IMF and the World Bank. More land has been taken out of food production as a result than any shift to biofuels. It has hit poorer countries particularly hard because they are the ones that have most needed IMF and World Bank support. Without subsidies, farmers in countries such as Ghana or Gabon – West Africa has been particularly affected – could not compete against cheap imports from the big producers, and gave up. But no one realized a crisis was brewing because cheap food imports continued to arrive. It is only now, with prices rocketing, that poorer countries find they do not have enough local producers to fall back on.
Then again, we can focus on growing meat without having to grow animals -see Tastes Like Chicken in Slate.
And finally, a brief survey of the blogosphere:
In the slums of Iloilo City, circa middle of 1970s, back when the NFA (National Food Authority) was still known as the NGA (National Grains Authority), “NGA” was synonymous to an inferior variety of rice — dark-grained, 50% broken, and had a chemical-like smell.
Therefore, I am surprised that unscrupulous traders nowadays can repack NFA rice, which retails at P18.25 per kilo, and pass it off as commercial rice, now selling at up to P34 per kilo as of posting time.
As a child, I remember Nanay occasionally taking home with her a brown paper bag containing a ganta (about two and a half kilos) of NGA rice. Those were hard times. Those were the times when Ferdinand Marcos rationed rice to just a few kilos per family.
A few months into the oil-rice crisis of the 1970s, the NGA resorted to rationing rice mixed with corn grits. Although the yellow corn grits-white rice grain mixture looked good, either cooked or uncooked, swallowing it is another matter. The discriminating Ilonggo palate just does not have the tolerance for corn as the staple. We may eat corn during snacks — on the cob, steamed or broiled, or as popcorn, but not when cooked as rice.
I did not remember exactly how long the corn-rice blend lasted in Iloilo, but I can still recall that the Ilonggos did not enthusiastically receive it. We survived and outlasted the rice crisis by subsisting on “binlod” (Tagalog: binlid) — 90 to 100% broken rice grains. Normally, binlod should be chicken feed, but undoubtedly, it fells better on the palate than corn-rice. Binlod is best eaten as “lugaw” or porridge. Sometimes, Nanay would be lucky to obtain some “laon”, which was only slightly better than NGA rice, and we would feel blessed.
Yes, we survived the rice crisis then and we can survive it now.
My mom’s having a hard time ordering rice right now. She said the price of rice has risen twice over the week. She’s called all her friends and our relatives. One is selling a sack for 1,500 pesos, our aunt (who owns a stall in a public market) is selling hers for 1,800 pesos. Rumor says that a sack would cost 3,000 pesos in a few week’s time.
I don’t think there is a rice shortage at the moment. People are just getting greedy and hoarding the sacks out of greed and paranoia. It’s mass psychology at work. The rice crisis is a self-fulfilling prophecy that is slowly coming true.
Mom’s thinking of sending our workers out to buy NFA rice. It’s cheaper (18 pesos per kilo versus 35 pesos selling in the market). But you have to line up pretty early in the morning (around 5am) to buy the rice (shop closes at 10am). Each buyer can only buy up to two kilos of rice. There are cops (or soldiers) standing guard, making sure that everyone gets a fair share of the NFA rice.
April 11: see Splice and Dice:
That is the part where a morally bankrupt regime purports to be the moral buttress of the nation. That is the part where a Garcified leadership pretends to wrestle with the liars, cheaters and thieves in this nation when that leadership has nobody else to wrestle other than themselves. That, too, is the part where a gloriafied regime sees everything else as investments, owing largely for its economic eye, while failing to understand the basic difference between what is legal and what is just.
I’ve always believed that what is legal does not necessarily equate with what is just. While we may have laws, and we do have laws, there remains the sweeping thought and feeling that we lack justice. Invoking an executive privilege may be legal, but does it bequeath us any justice? Well beyond all that there is to be truly disappointed about, sanctifying that executive privilege, one which has truly become a privilege in the strictest sense of the word, by the prostitutes of the law corrodes the fists of justice. It’s a case where a distorted defense of a privilege which the constitution does not even explicitly provide tramples upon the written forces of truth and transparency, the gravity of which pins us back to a crisis worse than one plaguing our rice supplies.