Old lessons from a recurring crisis

The present rice supply crisis is a recurring one, and by this time, our officials should have learned lessons but apparently haven’t. Worse, while the President was enjoying the FI races in Singapore, former president GMA was in Indonesia sharing lessons of the past that made the President look bad for creating an avoidable rice crisis.

Putting on her professorial hat, former president Arroyo opened her speech before Golkar, the major Indonesian political party, by making it clear our rice crisis shouldn’t have happened.

Said FPGMA: “The policies and programs to address this issue do not need to be reinvented. The decisive factor will be ‘implementation’: meaning, ’executive management’. (BBM: Aray ko po!)

“WE HAVE MET THIS SITUATION BEFORE (caps hers). The current global anxiety over rice prices and supplies reminds me of the situation faced by rice-staple nations like Indonesia and the Philippines a decade and a half ago in 2007 and 2008, when rice prices tripled in a few months…

“HISTORY REPEATS ITSELF (caps hers). Now, back to 2007 and 2008: It seems that in July 2007 Vietnam restricted rice exports… India joined the ban in October 2007, and Vietnam banned exports in February 2008, leading to a global rice crisis… Rice exported at over $1,000 a ton in April 2008…

“With the global grain price surge, Philippine prices also rose, even though our rice harvest was the highest in the decade. Our rice harvest had been boosted by hybrid varieties developed with my government’s funding. But as usual, the global price surge led to speculative hoarding…”

FPGMA emphasized that the government must secure the country’s rice requirements early, as well as boost domestic production.

“To bring down prices and stabilize supplies,  (then) Agriculture secretary Arthur Yap, a former Economics student of mine, imported rice, partly through government-to-government contracts by the National Food Authority or NFA. The Philippines bought close to 65 percent of its rice needs early, at a low early price.

“Later in the buying season, the only countries capable of supplying reasonable quantities of rice were Thailand and Vietnam. The Philippines had a good relationship with both countries. Invoking old trading ties and the promise of future business, we secured the balance of our needs from Vietnam still at a good price. The Philippines eventually procured a record 2.3 million tons, and the NFA released affordable rice to the market. We kept the price of rice stable at 49 US cents a kilo and non-NFA rice not much higher.

“Secretary Yap recounted that several traders asked him to delay releasing NFA rice until they could dispose of their stocks. He refused. Yap flooded stores, leaving hoarders with big losses.

“So, what experience can we share from 2008 and other rice crises? MAINTAIN MARKET CLOUT. One obvious resilience experience is that the government in 2008 had ample market clout to defeat and deter speculators. Speculators will always seek to treble profits by holding on to stocks, which escalates prices and future gains. But we maintained market clout, especially in areas likely to suffer shortages, like typhoon-prone regions and urban areas far from farms. The government kept ample stocks all the time, rather than rushing to import when prices shot up.”

This is exactly what we have been saying in past columns. The problem is supply and the perceived scarcity is driving up prices. The perception that NFA has practically no buffer stock, thanks to a talkative DA usec, emboldened rice traders to start hoarding and start raising retail prices.

The President probably didn’t give NFA enough budget to buy from local farmers to boost its buffer stock. The PR gimmick of DA officials trying to suck up to the President by selling some of NFA’s stock at P20/kilo at the Kadiwa centers further depleted NFA’s buffer stock. In other words, the current administration created their own rice crisis. Absolutely pathetic!

FPGMA emphasized in her speech the importance of NFA having enough buffer stock because any inadequacy is a big contributor to speculative trading, specially for a basic commodity like rice which consumers must buy at any price.

“For example, back in 2017 (Duterte watch) the NFA used almost $40 million to pay down its debt rather than procuring rice. That and the limited harvests in the first half of the year led to speculative hoarding and profiteering. Some observers even wondered if traders had colluded with NFA insiders to deplete the agency’s stocks.”

A summary of her speech had a line at the end that proudly proclaimed she didn’t impose any price caps because she didn’t have to. She used market forces to control prices.

Then, FPGMA said: “BEYOND IMPORTATIONS, WE MUST BOOST DOMESTIC PRODUCTION. To have sufficient rice reserves in the event of supply and market disruptions it is important to boost domestic production. Depending too much on imports exposes countries and consumers to the vagaries of the highly volatile global rice trade.”

What she did not say is that after she temporarily solved the 2007 crisis, the country’s rice deficit has increased and remains vulnerable to global supply fluctuations. That’s because she failed to address long term systemic problems like land fragmentation. As one economist friend of mine commented, “without changing the structure of our agriculture from small, atomized, traditional farms into modern agribusiness commercial enterprises, we will never solve the food production issue.”

In other words, what FPGMA accomplished was successful firefighting, but the causes of the fire remain and are waiting to be ignited the next year and the next. That’s what every president has been doing rather than fixing the problem for good.

FPGMA talked about other things which are motherhood plans that every administration says they will do, but eventually fail to properly implement. Farm modernization, for instance.

The Agriculture and Fisheries Modernization Act of 1997 has yet to produce useful and significant results. Even in her time, a P728 million fertilizer scandal happened as an agriculture undersecretary close to her took advantage of the program to provide fertilizers.

But FPGMA is right. The President must learn lessons from the past to make our agricultural sector efficiently produce the food we need to feed our people. Stop talking and start implementing those motherhood intentions.

Boo Chanco’s email address is [email protected]. Follow him on X (Twitter) @boochanco