Food prices: We had it coming!

It was not getting the attention it needed from officials as well as from media. Now it is here and is hitting the headlines. But the focus is more on the “firefighting” nature of government responses to the crisis in the short term. Maybe this problem will have our attention for a couple of weeks to a couple of months… until same time next year when the crisis is again confronting us.

But I sensed it was more than the usual thing about food prices when The Economist first broached the idea of agflation — an era of rising food prices aggravating inflation in an economy that is stagnant or worse. It had to come a lot sooner than later and this time, it is not limited to a country or a region but worldwide.

We all had it coming. Agricultural land was being lost to energy crops, residential subdivisions, commercial centers and industrial parks. Food crops are being diverted to energy use. Global warming and fast changes in weather patterns are affecting crop yields. And for the Philippines, three babies are born every minute but Ate Glue is unlikely to change her staunch opposition to an effective family planning program at a time when the support of politically powerful bishops is so crucial.

So now it is here. Last week, the Financial Times reported “rice prices surged to a 34-year high as the Philippines awarded a tender for the staple at an average price of $708 a ton, up almost 50 percent from the price it paid in late January…” This puts the price of rice high in our country’s political agenda. The FT observes “the jump in rice prices would exacerbate rising inflation in Asia and risks triggering social unrest, analysts said. The Philippines, one of the world’s biggest rice importers, is particularly exposed… Rice is trading at the highest level since mid-1974 when prices surged in the midst of the first oil shock.”

In reaction, Ate Glue announced she was allocating billions of pesos supposedly to avert a food crisis. That surely makes good copy for a press release to show she is doing something. But Ate Glue and the more responsible segment of the opposition must recognize the things that made this crisis have a more chronic nature for us.

Dr. Rolando Dy, the agri-business expert of the University of Asia and the Pacific blames the current problem on a number of things. “Over the past decade, harvested area has been at best stagnant. Conversion of rice lands, deterioration of irrigation system due to inadequate maintenance, decline in river flows due to climate change and deterioration of the watersheds, all affect rice production.”

Dr. Dy observed that even if average yields increased with the use of certified and hybrid rice seeds, the spike in world fertilizer prices plus higher logistics costs arising from high oil prices could have reduced fertilizer use which pulled down productivity growth. Then, there is this unexpected change in demand patterns negating any increases in production rate. “While production continued to increase over normal consumption growth, the increase in per capita consumption was not foreseen.”

Dr. Dy explained that “with higher income and urbanization, there should be a shift in eating pattern from rice to flour (in the form of noodles and bread). But the high global wheat prices, and in turn, noodle and bread prices caused a shift to rice by the masses. Rice is a cheaper alternative. As a result, government figures show that per capita consumption increased to 120 kilos per person per year today from 105 kilos about four years ago. Actually, it should decline but perhaps the fruits of GDP increases are not equitably distributed.”

In sum, Dr. Dy thinks our long-term problem lies in our failure to adequately invest in agriculture: from farm infra to marketing infra to agriculture R and D. While Agriculture Secretary Arthur Yap is giving these logistical matters top attention, all that may still be too little too late to help us out in the current crisis. The AFMA, Dr. Dy laments, failed to deliver the resources.

Then, there is the matter of social equity as it relates to our rice farmers. As I pointed out last Monday, we have failed to make rice farming profitable for farmers, or even sufficient to lift them out of poverty. There is no incentive to do well or even remain in rice farming. Yet, there was this news story about some idiot who wants to encourage returning OFWs to go into rice farming.

Doing something to uplift the economic conditions of the farmers will give our economy a boost even as it supports social equity goals. Agriculture accounts for 20 percent of our GDP. But economist Dr. Cristina David estimates that “when all economic activities related to agro-processing and the supply of non-farm agricultural inputs are included, the agricultural sector, broadly defined, accounts for about two-thirds of the labor force and 40 per cent of GDP.” 

The social welfare impact is also so compelling. Dr. David observes that “with almost 70 per cent of the poor based in the rural sector and depending directly on agriculture-related economic activities for their major source of livelihood, the attainment of food security and alleviation of poverty requires rapid, sustainable and equitable agricultural growth.”

In a sense, Dr. David sees the current rice price crisis differently from most of us in media and government. In the chapter she contributed to an excellent compilation of academic papers on the Philippine Economy (edited by Arsenio Balisacan and Hal Hill), Dr. David noted that “in contrast to the political objective of food self sufficiency, food security means ensuring household incomes, specially those of the poor, are sufficient to purchase adequate food — whether imported or locally produced — at reasonable prices.”

In other words, subsidizing the price of rice at P18.50 a kilo may do as a stop-gap measure, but we can ill afford to have it year after year. For one thing we cannot really afford the rising magnitude of this subsidy as the price of imported rice is now over $700 a ton and could reach $1000 according to Agriculture Secretary Arthur Yap. The National Food Authority (NFA) could end up like the National Power Corporation. Government’s fiscal health is threatened.

Dr. Dy thinks “Art Yap is a hard worker. However, due to past political interferences in DA appointments and lack of continuity, DA bureaucracy has weak absorptive capacity. Ask the donors.”

Dr. David also cites “problems in the institutional structure of the agricultural bureaucracy lowered the efficiency and effectiveness of government efforts to correct market failures.” While Agriculture Secretary Yap must for now fight fires like this rice price and supply crisis, he and the rest of his staff must not lose sight of the structural problems that must be addressed. I can see Art doing some of that already, but the problems are quite large and vested interests in the current environment are fighting hard to keep the status quo.

That’s actually where the President, if only she had more credibility, is expected to take the lead. But in the light of the JocJoc Bolante fertilizer scam among others, Ate Glue has no credibility to lead the DA bureaucracy to put necessary reforms in place. I have also heard some of them joke about such things as “farm to wallet” roads.

The way I see it, our ultimate goal should be to make rice farming profitable for the farmers. That’s the only way to encourage productivity and assure our food security in the sense that our people can afford to pay the cost of producing their food.

Brand new

From Anna Gimenez.

Boss: Why should we hire you?

Tikyo: Mas mabuti po ang bagong tulad ko dahil wala pang sungay.

Boss: English please.

Tikyo: Well, you see, uh, I’m brand new so I’m not yet horny!

Boo Chanco’s e-mail address is [email protected]