Spooked

This is mind-boggling.

After ordering price caps on rice that would certainly hurt the small retailers, the Palace is now rushing to remunerate them P15,000 each through the DSWD. Not to be outdone, various local governments are promising retailers such things as cancellation of rentals for their stalls to help them survive the price capping.

Through the first day of the price caps, it was observed that the executive order was largely honored in the breach. Retailers either reclassified the rice they sell or limited their stocks of lower priced rice subject to price capping.

It was only in the big markets in Metro Manila, where government officials were likely to appear for photo-ops, that retailers religiously followed the mandatory price caps. But many of them did not stock up on regular-milled varieties. By noon last Tuesday, the capped rice varieties ran out of stock.

One television clip featured a dour-faced retailer dispensing her stocks to consumers eager to take advantage of cheaper rice. She said she was losing P8 for every kilo of rice sold. This was not a happy day for her small business.

The more worrying thing, however, are reports that some of our rice importers have cancelled their orders from Thailand and Vietnam. Given the price uncertainties, it was certainly the most prudent business decision to make. But this is not the best thing to happen during a moment when tradable rice stocks were thin and the severity of the El Niño phenomenon is uncertain. When the crunch happens, we will have no buffer stock to speak off.

Rice and oil are the two most politically sensitive commodities in this country. We import nearly all our oil and a larger part of our rice. That means we have less and less ability to control price movements in both commodities.

We used to assume we could import rice on demand because we were paying more for the commodity. That is no longer true. At the rate rice prices are rising in Asia, imported rice could actually become more expensive than local varieties. This is a factor explaining the reduced propensity of importers to place orders abroad.

Add to this the possibility they might be labelled “smugglers” and “hoarders” – the bogeymen blamed for higher rice prices. No one wants to talk about the structural inefficiency of our rice production. That is too complex and will take too long to repair.

The administration is, no doubt, feeling the heat from rising rice prices. Spiking food and energy costs are the reasons explaining why the inflation rate for August began going up again. Only intense political heat could explain the funny economics underpinning the price caps – or the policy improvisation, such as remunerating retailers, that followed.

In survey after survey, the administration rates lowest for inflation management. The more prices rise, the lower public approval of the administration’s performance will be. This is especially true because President BBM chose to serve concurrently as agriculture secretary. The buck stops with him.

The political calculus here is fairly simple. It will take longer than the current presidential term for any palpable improvement in our agriculture to happen. Therefore, anything he does in this sector will be deemed a failure.

We are told that the rice price situation would improve in a few weeks after bountiful rice harvests are made. If the harvests are not as bountiful as the DA bravely projects, we could have rice rationing – because in the meantime the price caps have spooked our importers.

There has been persistent speculation that Mar Roxas could be named agriculture secretary. The President should have made that appointment on Day One. If he did, we would have a convenient Dilawan to blame for the crisis we are experiencing now.

It would be too late to appoint Mar tomorrow. Things are so bad now, they will just have to get better somehow. Mar will reap the praise and the President will harvest the scorn.

A week, as one British statesman observed, is a very long time in politics.

Congress is not helping relieve the anxiety about food price stability. The other day, some bright legislator thought it a good idea to empower President Marcos II with emergency powers to deal with the rice situation. The only way for emergency powers to be strategically important for our failing agriculture is if those powers are used to roll back the agrarian reform program – the main reason our farms have been trapped in subsistence level.

In our collective policy imagination, we have created a destructive binary distinction between “agriculture” and “industry.” Because of this, we have encouraged investment flows to “industry” but not to “agriculture.” Agro-industry just fell through the cracks.

Not only do we have a creaky logistics system that delivers the crop to the final consumers with high spillage and spoilage, we do not have elementary food processing to extend the shelf life of highly perishable produce. We do not have enough of a cold chain to conserve our onions. We do not have enough basic manufacturing to can produce.

A few months ago, farmers were dumping tomatoes by the roadsides because they could not be sold. The last few days, prices for tomatoes tripled because there is not enough of them.

In the stews I make, I use canned Spanish or Italian tomatoes, creamed or chopped. That is only because they are actually cheaper.