In early 2008, the long queues on National Food Authority (NFA) retailers, labor sector’s demand for wage increases, cause-oriented groups’ rhetoric and oppositionists’ tirades were the scenes that dominated the news. The main reason – soaring prices of rice remained unabated.
While the labor sector’s and the consuming public’s pleas were all reasonable, as usual, cause oriented groups and government critics (though consumers themselves) were seemingly riding on. They were castigating the administration no end, trying to paint before us the government’s ineptness in handling this crisis. As usual, they amplified or exaggerated it to gain sympathy and advance their own political or selfish causes.
Though some of these ideologues and political grandstanders were just taking advantage of the situation to gain media mileage, the fact remained then that we were in deep trouble.
Then, the critics’ harshest attacks had been aimed towards soaring prices of the main staple. Yes, it was then a fact that the price of the main staple was soaring. NFA’s rice was pegged at P18.25 per kilo while the commercial stuff (depending on the quality) was drifting between P30.00 and P50.00 per kilo. Finding it anomalous, critics had accused major players of undermining the public by conniving to manipulate these prices. To appease critics and jittery consumers, then President Arroyo ordered the regulatory agencies to strictly monitor traders and prosecute opportunists who were illegally hoarding stockpiles of them. A temporary solution that will only be effective if regulatory and monitoring agencies will remain honest.
Arguably, another temporary solution that has become seemingly permanent is the price subsidy the government is providing through the NFA. Unknown to most of us, the government has been subsidizing NFA rice for decades now.
For instance, on May of 2008, Thailand, our biggest supplier, quoted US$900.00-US$920.00 per ton, free on board (FOB). This price range was even a rosy development considering that in the last week of April that year, they quoted US$990.00-US$998.00 per ton, FOB. Since this is FOB-Thailand, shipping costs are still to be added.
Should we use the May 16th (2008) exchange rate of PhP42.752, the price therefore per ton was between PhP38,476.80 and PhP39,331.84. Even if we set aside a very material factor that was shipping costs, palpably, the price per kilo was between PhP38.48 and PhP39.33.
As the NFA held on to the price of P18.25 per kilo, simple math told us that in every kilo it sold, it had to loss at least PhP20.00. Therefore, the more it sells, the deeper it drains its resources. Said differently, it also means that in every kilo of NFA rice consumed by our brother Filipinos, the government paid more than one-half of its cost.
This subsidy is confirmed by the financial reports of the NFA. In 2008 alone (the food crisis year), its sales was just PhP39,108,483,641 out of its huge cost of PhP60,161,995,956 resulting to a staggering loss of PhP21,053,512,315. With its operating expenses amounting to PhP5,069,558,878 and financing and other expenses totaling PhP8,085,793,264, NFA’s net loss for the year ballooned to PhP32,208,864,457.
This scenario has been repeated for many decades now. As a result, NFA has so far accumulated losses amounting to a seemingly uncontrollable PhP80,085,099,672. With only PhP5,000,000,039 in equity, NFA is capital deficient by PhP75,085,099,343. This simply means that its liabilities are more than its assets by PhP75,085,099,343.
In this precarious situation, we have to ponder longer than necessary. Considering that this is the staple food for half of the world’s growing population and some countries (like Egypt) had shifted from bread to rice, expect an uncontrollable rise in demand. Therefore, a global food shortage is a big possibility.
This alarming situation was confirmed by the report of the US Department of Agriculture. It mentioned that while “Rice yields globally expanded more than 40% from 1980 to 2000, they’ve increased only about 5% since then. Stockpiles will fall to 75.2 million tons, about half of where they were at the start of the decade.”
Clearly, therefore, supply will be a huge problem in the coming years. This is so alarming that even if NFA will have the money and shall continue subsidizing the entire population as mandated, it should be running out of rice to buy in the near future.
Self-sufficiency is the keyword. We can start this crusade by revisiting what we’ve done right in the Masagana 99 and Masaganang Maisan programs in the Marcos era. Though, tainted with abuses, not everything was wrong during those decades. These two self-sufficiency programs were laudable to some extent and are worth looking into.
Secondly, our lawmakers and government executives should provide clear guidelines on new initiatives that will in any way affect food production. For instance, the implementing guidelines of the biofuel act should strictly provide that proponents could not convert areas devoted to food production to this new initiative. While we have nothing against this program, we feel it is just so inappropriate to gain in one program and loss in another. In the end, we gain nothing.
Thirdly, just like the scrapped Oil Price Stabilization Fund (OPSF), NFA’s situation might just explode right in our very nose. Caught unaware, the only solution left might just be to cover our noses. Unknowingly, in covering our noses, we are unable to breath. Certainly, therefore, the idea floated by President Aquino and some economists of abolishing NFA (just like the OPSF) must be given a serious thought.
Put bluntly, subsidy is not the solution to our food crisis. Subsidy is a good breeding ground for mendicants and should be avoided.
However, in the meantime that the government embraces temporary solutions, we can be just passive bystanders and be witnesses of the same scenes unfolding repeatedly in the future. Absolutely, there will be countless of clashes between the government and some rowdy ideologues who may just take advantage of the situation to purposely gain undeserved recognition.
In all these routine clashes though, we can only wish both sides to be more circumspect in their actions. Regardless of how publicity hungry they (ideologues) may be, prudence still dictate that they should first look into some facts before agitating the public to take drastic actions. On the other hand, instead of simply parrying criticisms hurled at them by bringing in temporary measures, our government should take the initiative of drawing permanent solutions.
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