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PHILIPPINES: World’s Top Rice Importer Hit By Tight Supply

Stella Gonzales

MANILA, Apr 6 2008 (IPS) - Responding to a call to Filipinos to eat less of their staple, fast food chains are now offering half portions of steamed rice on their menus. And President Gloria Macapagal-Arroyo is personally inspecting warehouses to show that her government is working to deter hoarding.

But is there a real shortage of rice in the country? Or is it an artificial shortage caused by unscrupulous traders and hoarders?

Economist Cielito Habito pointed out a “rather glaring disconnect” between the fact that the tight supply came even as government claimed to have achieved a 10 percent increase in rice production. It could be, he said, that the statistic is “questionable”.

“I will not be surprised if this were the case because we have even been questioning the validity of the GDP (gross domestic product) report of the government. It is not inconceivable that the statistics (on rice production) are faulty,” Habito told IPS.

However, if the report on rice production were true, then “it only points to the conclusion that this is an artificial crisis created by long-suspected cartels in the industry that are taking advantage of the tightness in world supply,” Habito said.

He noted that the supply shortage in the country developed only after news reports came that other countries were experiencing similar problems. “It is quite plausible that the cartels started taking advantage of the situation and created an artificial shortage,” Habito said.

Habito was economic planning secretary when the country was hit by a rice crisis in 1995. Back then, there was an actual decrease in rice production due to adverse weather conditions. The National Food Authority (NFA) also made some bad decisions on rice importation. And the rice cartel profited from the situation.

However, at that time, there was no tightness in global rice supply and the government was immediately able to import from other countries and control the situation.

Rice importation is one of the government’s solutions to the supply shortage and there are plans to import 2.2 million metric tonnes of rice from Vietnam, Thailand and the United States – the biggest volume since 1998.

The Philippines has always been importing rice, except for a brief interlude, and many Filipinos find it strange that the country has not attained rice self-sufficiency though it is host to the International Rice Research Institute (IRRI) and has its local Philippine Rice Research Institute.

Decades ago, Vietnamese and Thai students learnt rice cultivation methods in Philippine universities and implemented these upon return to their countries. Thus, many find it ironic that the Philippines is now the world’s biggest rice importer and has to buy rice from the very same people who studied in its institutions.

Local rice production is small scale and productivity per hectare of land is considered low – about three metric tonnes. The IRRI says the required yield for food security is 3.4 metric tonnes.

Agricultural land is being diverted for commercial purposes and housing and farmers do not receive enough incentives to continue producing rice. And they have to contend with problems such as poor irrigation facilities and private traders who buy their palay (unmilled rice) at a low price.

The NFA, the government agency in charge of ensuring food security and stability in supply and price, has been buying palay from farmers, but just on a limited scale – only one percent of the total production of 12.24 million metric tonnes last year – leaving most farmers in the hands of commercial traders.

Last week, Arroyo ordered the NFA to increase its palay buying price to 17 pesos per kilo (0.40 US dollars) from 12 pesos (0.28 dollars)

Habito said this could provide a short-term solution because it would give an incentive to farmers to produce more. “The question now is would the increase be enough to provoke the commercial traders to raise their farm gate price too?”

A factor that must be considered, Habito said, is that NFA buys only one to two percent of the total rice crop, and it is likely that it would “hardly make a dent in the market price.”

Representative Satur Ocampo of the party-list Bayan Muna (People First) said the NFA must increase its procurement capacity. “Raising prices of palay alone will only match the buying price of unscrupulous rice traders but will not in any way counter their monopoly in supply and ensure that rice prices will be stabilised,” he said.

Ocampo said the NFA must buy at least 25 percent of palay harvest to offer an effective challenge to private traders.

Economists like Habito want the NFA abolished or at the very least its monopoly over rice importation removed. “The NFA distorts the rice market because it is always relying on government statistics,’’ he said. ‘’If there is a brewing rice shortage, it is the rice traders who are the first to anticipate this and should be in a position to place import orders right away.’’

In response to the tightness in rice supply, the NFA has re-packed its regular milled rice (the cheapest in the market at 18.85 pesos (0.45 dollars per kilogram) into retail-sized one- and two-kg bags. A grain retailers group, however, said the re-packing only meant extra costs and was wasteful because the grains are originally packed in sacks.

The NFA has also been directed to sell directly to consumers the well-milled commercial rice variety at 22 pesos ( 0.5 dollars) per kg following complaints that it was either scarce or not available at all. In some cases, what was being passed on as “well-milled” rice turned out to be a mixture of the regular milled and the well-milled variety. In other cases, the “well-milled” rice was actually of the regular variety that had been re-bagged and sold at higher prices by some traders.

Habito said the government must look for long-term solutions to the rice problem, including irrigation to raise productivity, credit for farmers and addressing the rice trading system that is easily manipulated by unscrupulous individuals.

The availability of credit, he said, is important because in its absence traders take advantage of farmers by lending them money and buying their palay at lower prices. During the food summit, Arroyo announced that the government was increasing spending on fertiliser, irrigation and infrastructure, education and research, credit for farmers and distribution of high-yield rice seedlings.

But the government is yet to show results for its previous efforts to help farmers. A day after Arroyo’s announcement, the Kilusang Magbubukid ng Pilipinas (Peasant Group of the Philippines) was demanding that the administration account for the three billion pesos ( 71 million dollars) in irrigation funds that were supposed to have been distributed last year.

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