Are we prepared for food price inflation?

It is practically here… knocking on our doors. Yet, I don’t detect any signs of urgency on the part of our government officials responsible for assuring the stability of our food prices. And signing an order establishing price ceilings is not exactly being responsive to the threat of food price inflation.

Last week, international media reported record levels of food price increases. The Food and Agriculture Organization (FAO) of the United Nations warned of a repeat of the 2008 global food crisis as crop harvests fall in the United States, Europe, Australia and Argentina, and agricultural-commodity prices spike in global markets.

FAO released a report last Thursday that warned of global food prices moving ever higher, hitting record levels last month. The report blamed a jittery market reacting to unpredictable weather and tight supplies as the reason for worrisome price increases.

The FAO price index, which tracks 55 food commodities for export, rose 3.4 percent in January, hitting its highest level since tracking began in 1990, the report said. It was the seventh month in a row of food price increases, according to FAO.

Ngozi Okonjo-Iweala, the World Bank managing director warned: “Food prices are not only rising, but they are also volatile and will continue this way into the future.” Four main factors are seen as driving prices higher: weather, higher demand, smaller yields and crops diverted to biofuels.

Sugar prices are at a 30-year high. Prices for cereals are rising but still below their April 2008 peak. Oils and fats are up and close to their 2008 level, and dairy is higher but still below its 2007 peak, the report said. Even positive news, like good rains in Argentina and a strong harvest in Africa, has failed to keep prices from rising.

In the Philippines officials are warning of more floods and landslides in the country’s eastern seaboard. About a third of the Philippines’ 80 provinces, mainly in central and southern regions, have been inundated by the rains that began in late December, with more than two million people affected. Damage to agriculture and infrastructure was so far estimated to have reached over P2 billion. Luckily, the rains have so far spared major rice and corn production areas in the north and western parts of the country.

Experts also point out increased demand for food exports. For instance, changing diets stemming from higher incomes, especially in places like China and India, mean a greater demand for meat and better grains.

A severe drought in northern China has badly damaged the winter wheat crop and left the ground very dry for the spring planting. This has fueled inflation and alarmed China’s leaders. Unusually widespread frost has hurt the vegetable crop in southern China. Price controls had already been imposed in mid-November. But state media began warning a week ago that price controls on food might not be effective.

High food prices have been among the many reasons for protests in Egypt and elsewhere in the Arab world. Egypt was among more than a dozen countries that experienced food riots in 2008. No wonder Chinese leaders are very sensitive to the political dangers posed by food price inflation.

Uncertainty is also pushing food prices up. Analysts point out that because stockpiles kept by some governments of some basic food stocks are now low, prices will probably continue reaching new heights, at least until the results of the harvest next summer are known.

High prices aside, available supply could eventually be a problem. When commodity prices last surged in 2007 and 2008, the New York Times reports that at least 29 countries sharply curbed food exports in attempts to prevent domestic food prices from rising as quickly as world prices.

And rich countries can box poor countries out of the market. China’s $3 trillion in foreign exchange reserves gives it virtually unlimited ability to import food as long as major grain producers do not limit exports.

If China becomes a large importer of food it could push up world prices and make it harder for poor countries to afford food imports. China imports a lot of soybeans but tries to be essentially self-sufficient in rice and other grains for national security reasons.

The Philippines had previously been accused of pushing up the world price for rice with its large panic purchases two years ago. Better planning of planned rice importations by our officials will prevent a repetition of the panic importations in the past and also help bring down the price of our imports.

We also have to seriously address the problem of food security by modernizing our agricultural sector. We have to abandon old notions of agrarian reform if we are to take full advantage of economies of scale in food production, the way the farmers in the US, Australia and Argentina are doing it. In any case, we are fooling ourselves in believing that our current agrarian reform program is working to benefit the poor farmers.

The Chinese now have agricultural corporations that grow various crops in efficient large scale farm operations. They are doing this not just in China but in some areas of Siberia that the Russians have depopulated and have been unproductive until the Chinese agricultural companies took over.

The same Chinese corporations signed MOUs with former Agriculture Secretary and now Rep. Arthur Yap some years ago to develop large tracks of land here whose production levels are not being maximized. But I understand the proposed ventures did not push through because of legal issues that came up, notably our agrarian reform law.

I can’t understand why we are insisting on breaking up farms into unviable sizes of a hectare or two per agrarian reform beneficiary. We have proven our concept of agrarian reform does not work for the farmers and for the economy. Yet, we insist on the same discredited strategy to attain greater social justice.

There is no doubt farmers can move up the social ladder faster if they are part of profitable agricultural operations. And the business prospects for properly managed agricultural concerns are very bright in the years to come. On the other hand, most of our farmers cannot escape the cycle of poverty and their shackles to usurers under our present agrarian reform law.

It is unfortunate that P-Noy cannot initiate a more innovative approach to land reform without being accused of a serious conflict of interest because of Hacienda Luisita. But we must give him the chance to do something better if only because we just need to improve our food security situation by being more efficient in growing our food.

In the meantime, we just have to bear and grin it as our inflation rate goes up because food prices are going up and there is little we can do about it.

Binay in America

Vice President Jejomar Binay was also checked out by the influential conservative Washington think tank Heritage Foundation. A release from the Foundation indicated that Veep Jojo met with Kim R. Holmes, Ph.D.,Vice President of Foreign and Defense Policy Studies at The Heritage Foundation and Walter Lohman, Director of the Foundation’s Asian Studies Center.

The Foundation was unable to supply me a copy of the transcript of discussions because it was supposed to be off the record. But the release said they discussed the findings of the 2011 Index of Economic Freedom. “The private discussion also ranged a number of other issues, including the state of the Philippines-US alliance, conflicting claims in the South China Sea, and the security situation in Mindanao.” Those questions were certainly asked to enable the Americans to see if Binay could be a worthy successor.  

The Foundation reportedly offered some ideas for how the economic environment could be improved and the Philippines’ high 2010 growth sustained. Vice President Binay’s delegation included Amb Willy Gaa of the Philippine Embassy in Washington, D.C., Makati Mayor Hon. Jejomar Erwin Binay Jr., Rep. Rodolfo Plaza, former Flag Officer in Command of the Philipine Navy Vice Admiral (Ret.) Ferdinand Golez, Hon. Leonora Vasquez-De Jesus, Hon. Francisco Tatad, and Amb. Jose Apolinario Lozada Jr.

Happy birthday, Mr. President

From the Professional Heckler:

Tomorrow, Feb. 8, President Benigno “Noynoy” Aquino III is turning a year older… or as his government would call it “age hike.” He was born under the sign… “Smoking Area.” To mark his birthday, the President will smoke 51 candles.

There will be singing, dancing, and exciting games. Members of Balay and Samar groups will play tug of war.

Just so you know, on February 8, both Communist leader Jose Maria Sison and President Noynoy Aquino will celebrate their birthday.

What do CPP-NPA founder Jose Maria Sison and the late American actor James Dean have in common? Answer: They share the same birthday – Feb. 8, and they’re both rebels without a cause.

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