A little over a month since he took office at the Department of Agriculture, I asked agriculture secretary Francisco Tiu Laurel Jr. about the rising prices of vegetables. He looked at his mobile phone and rattled off the prices of a few. Yes, prices are rising but he is already working on the logistics side of the agriculture sector to make things better.
The DA Secretary looks like the right choice to lead the agriculture department at this time of food crisis. Sec, Laurel obviously understands food distribution, and being a businessman, his approach is pragmatic and results-oriented.
We have had politicians, bureaucrats, and academics on top of DA and they miserably failed. Perhaps this results-oriented executive will deliver outcomes we can see.
Now that he has been confirmed by the Commission of Appointments, expect him to clean up the DA staff of deadwoods who kept the sector at zero to one percent growth for many years. Imagine that… half a million new children are added to our population each year and our ability to grow our food declined or barely improved.
In his first press conference, Sec Laurel complained about misleading statistics. He was studying agricultural data before he agreed to the appointment and his gut feel told him the official numbers are not right. The DA secretary started to cross check with people who know the agricultural market and confirmed his hunch about misleading data.
Woe to those who fed him wrong data. Private business executives like him have no tolerance for subordinates who feed wrong data. He didn’t say it outright but it was obvious he was talking about rice.
The President,, by insisting on being agriculture secretary for a year, lost valuable time. He was making decisions based on bullshit data on sugar, rice, onions, fisheries, and other food items. By allowing himself to be fooled, the President was complicit in our very high food inflation that raised our inflation rate to a level that forced the BSP to raise interest rates several times.
The good news is, things should start getting better. The bad news is, things will probably get worse before they get better. It takes a while to fix something as broken as our agricultural sector. Indeed, before Sec Kiko can make things better, he has to avert a potential rice crisis first.
The fact that the palay (unhashed rice) price is through the roof is proof that something is wrong with DA’s data. The DA Secretary knows his first test is to assure an adequate supply of rice, specially through the extended dry season brought about by El Nino.
For starters, he warned the rice importers to use their import permits right away or he will cancel them. The importers are reluctant to import rice because the price in Vietnam and Thailand, our traditional suppliers, have gone up beyond their ability to recover in our domestic market. Temporarily suspending the 35 percent tariff appears to be on the table and may happen when Congress goes on recess. That will significantly reduce the chance that traders will lose money by importing.
My free-market economist friends have been wrong to think that the traders, acting on the basis of market signals (potential shortage), will rush to import, rice to take advantage of that opportunity. The traders are acting on self-interest by refusing to import given historically record high international rice prices plus a stupid price cap and bodega raids.
Actually, we should have imported a few months ago and stockpiled the way Indonesia did. A million metric tons of rice were initially imported by Indonesia in anticipation of El Niño and made a subsequent order for another million.
In our case, our traders rescinded purchase orders when the export price breached $600 per metric ton. Unfortunately, the Agriculture Secretary’s hands are tied because the government can’t import. So, no reasonable buffer stock.
But not to worry. Sec. Kiko was working on it even before he took office. He pursued a diplomatic approach with India. The latest I heard is that the Indian government has looked positively at the suggestion to exempt us from the export ban earlier imposed on rice. A government-to-government agreement may be in the offing.
Still, Sec. Kiko doesn’t want to be this helpless because the government can only boost our rice stockpile by buying from domestic farmers. To buy massively from local farmers, he needs a substantially increased budget for NFA. He wants a big enough stockpile that will help him moderate price movements of this very political commodity.
Sec. Kiko will propose to the President that NFA be given a wider leeway to increase the buying price in response to the market. He wants to reward the farmers who actually planted rice with a high buying price. This, he said, is better than the usual ayuda based on a list riddled with ghost farmers.
He wants NFA to be able to respond to the traditional traders who have now cornered whatever domestic rice supply there is. Their very high buying price for palay shows the intention of traders to hoard so they can call the shots if a rice supply crisis happens as early as next month.
As for sugar, Sec. Kiko also wants more timely importations to protect consumers, including businesses dependent on sugar. He is aware that El Nino has already caused a decline in production in Thailand, a major sugar producer. This means the landed cost of imported sugar will rise.
Sources tell me that we currently have a big excess stock from the last few rounds of imports. However, we still produce just around 1.8m MT, whereas consumption is around 2.5m MT. It is imperative that the SRA makes an import program in line with the interests of producers and consumers, not traders.
It is clear that Sec. Kiko has a full plate. He has been successfully running his own business and needs this job like a hole in his head. But he is eager and street smart and is doing this to help the country.
Good luck, Sec Kiko. And drain the swamp at DA. That’s the only way things will get better.
Boo Chanco’s email address is bchanco@gmail.com. Follow him on X or Twitter @boochanco