The rice problem is a management problem
Credit to Author: Ben Kritz| Date: Mon, 25 Nov 2019 17:12:05 +0000
PRESIDENT Rodrigo Duterte’s flip-flop on the suspension of rice importation last week in many ways perfectly illustrated the fundamental cause of this country’s problematic relationship with rice. From end to end, from cultivation to consumption, rice is badly managed. Figuring out why should not be the insurmountable challenge it appears to be.
That properly managing the Filipino’s staple food should be so difficult is really inexplicable.
The country has a large and well-funded Department of Agriculture, which prioritizes rice above all other agricultural sectors, and is now led by one of the most qualified and capable administrators to grace the post in years. There is an entire government agency – the National Food Authority (NFA) – ostensibly dedicated to managing rice at the level of a strategic resource.
The country also has a capable research and development institution in the form of the Philippine Rice Research Institute, and is host to an even bigger and more capable one in the International Rice Research Institute. Those intellectual resources augment the collective wisdom of at least 3,000 years of rice cultivation in the Philippines.
In short, the Philippines has every tool at its disposal, if not to be a world leader in rice cultivation, then to at least comfortably provide its own requirements of the staple grain. And yet, quite obviously, it is wholly incapable of doing that.
Reversal of decision
President Duterte added his hand to the mismanagement of rice last week, first ordering a suspension of rice imports but then reversing himself the next day. President Duterte’s initial decision was a logical response to the popular, though not entirely accurate, narrative that liberalized rice imports have caused local farmgate prices of palay (unmilled rice) to plunge to eight-year lows. His recalling the directive was an equally logical reaction to having the reality that rice imports are a necessity pointed out to him by his economic advisers.
President Duterte was understandably criticized for his apparent indecision, but it really wasn’t his fault. The explanation that local rice prices have dropped because of an import supply glut is accurate at a certain basic level, and the government can hardly afford to be perceived as simply letting Filipino rice farmers flounder.
On the other hand, the only way the Philippines can fully meet its demand for rice is to import it: At best, domestic production this year will reach 12.09 million metric tons (MT) of milled rice, which is 2.15 million MT short of the 14.24 million MT the country requires.
Imports are projected to reach 3.1 million MT this year, slightly more than China, which is ordinarily the world’s biggest rice importer. The excess of 950,000 MT might be a bit more than what it is needed to ensure a secure buffer stock in case of disaster — a consideration that President Duterte mentioned in explaining his flip-flop on import suspension — but not by much.
Instead of suspending imports, President Duterte indicated that the government would purchase local farmers’ excess stock at a fixed price higher than the market price — in effect, subsidizing the farmers — and allow imports to continue, albeit with a few tighter sanitary controls to prevent dumping.
That is a reasonable short-term fix, but it still skirts the larger fundamental problems with the Philippines’ rice sector. Given the added costs of transportation and tariffs, it is remarkable that imported rice is cheaper than domestic rice. Since rice is treated as a bulk commodity, the supply deficit of domestic rice does not explain the price difference; quality certainly does not explain it, either, as most imported rice is perceived by the consumer market as being of a higher grade than the locally produced varieties.
Production chain issues
|The problem lies in inefficiencies in the production chain. Despite research and development, the majority of Philippine rice production is done according to methodology that stopped evolving in the 1960s, leading to low yields and high production costs. The supply chain from farm to mill to distributor to market is inefficient as well, largely due to poor infrastructure. Until these basic problems are addressed, any attempt to manage rice through managing imports or applying quasi-market controls such as price limits or NFA buying is no more than a short-term stop-gap measure.|
Of course, another way to solve the Philippine rice “problem,” although no one is inclined to discuss it seriously, is to approach it from the demand rather than the supply side. In a study done about 10 years ago, 83 percent of Filipinos said that they eat rice three times a day, while 16 percent admitted to a twice-a-day habit; it is probably no coincidence that the country also has high rates of health problems such as diabetes (a little over 7 percent of the population) and cardiovascular disease. Reducing the 2.15-million MT domestic supply deficit could be achieved by cutting the average per capita consumption of rice by 20 kilos per year – from the roughly 133 kilos per person per year average now to about 113 kilos per person. Based on the average consumption, that amounts to about one half-serving a rice per day.
ben.kritz@manilatimes.net
Twitter: @benkritz