Rice

I’m happy Lito Banayo did not yield to the demand of leftist agitators who think government’s role is to give away free lunches to anyone who claims entitled to them. These agitators marched people to the NFA demanding rice be given away. Instead, Banayo said he might consider giving out rice in exchange for work contributed, such as cleaning the esteros.

I’m not too pleased, however, with his statement that the NFA is “swimming” in rice. It was that statement that precipitated marches organized by leftists demanding rice to be given away.

From what I know, the NFA is presently holding rice stocks equivalent to two months of domestic consumption. That might seem a lot. The standing practice, however, is for the NFA to maintain a buffer stock equivalent to three months of domestic consumption. Some have, in fact, suggested we raise our rice reserve to the equivalent of four months of domestic consumption considering it takes about that time for imported rice to be delivered.

In a word, we actually have less rice reserves than has been the traditional practice. In the event of a major weather-induced disaster, we might have to do rice-rationing.

Because we find it prudent to hold a substantial buffer stock of rice, we should expect some operational losses to occur. Rice sacks at the bottom of ten thousand other sacks will probably rot before they could be rescued. But that is part of the cost of prudential rice supply management.

By analogy, if we stock up on water in our homes as a contingency against supply interruptions, we have to throw some of them away from time to time to refresh the stock. We throw away old batteries from our emergency flashlights even if no emergency demanded their use. That is part of the cost of readiness.

Or, to use another analogy, we give our firemen their full pay even if no fire breaks out. That is part of the cost of maintaining emergency services in place. If we paid our firemen only when fires break out, we will encourage them to be arsonists.

This is not, of course, to condone inefficiencies in the management of our rice stocks. Surely we can never condone corruption at the operational level, which is said to be rampant at the NFA.

One informant tells me that the reason the NFA did not release as much of its stock as it should is because bribery happened. By withholding release of the aging stocks, prices in the open market were allowed to rise. This profited some traders.

The report deserves some looking into.

Because Banayo made so much of his story about “swimming” in rice, there arose a public demand to abolish the NFA. After that public demand began to gain momentum, the administrator stepped back and tried to justify the money-losing agency’s continued existence.

The NFA was able to somehow contain its losses when there was a substantial gap between our rice prices and those in the Asian mainland economies. It made money from being the monopoly importer of the commodity, buying cheap from abroad and selling at our higher price levels.

It is not true that our farmers are inefficient in producing rice. We produce more per hectare than anybody else. But we use much energy pumping water from aquifers for the crop, raising our production costs immensely. Our neighbors on the Asian mainland rely on big rivers that flow continuously from the high mountain ranges. Because we live in small islands, we do not have the luxury of amply flowing water.

With the thinning of world grain buffer stocks, rice prices in the Asian mainland have risen as well. That means the NFA cannot compensate through cheap imported rice the high cost of subsidizing our own rice producers.

There is no way we can ever become self-sufficient in rice. That is too costly a proposition. With our population size, we have an unsustainable man-to-arable land ratio. We will have to strip away land from more profitable crops and deny land for housing, which will push up the cost of shelter. Those who peddle the illusion of attainable self-sufficiency in rice are peddling an opiate to the people.

The large trends show that the mounting losses of the NFA will likely worsen. Even if we abolish that agency today, government will be left to shoulder the P177 billion in debt the NFA has accumulated. If we leave the NFA as it is, that debt could rise to a trillion.

The agrarian reform program unintentionally worsened our rice deficiency. By cutting up the land, it undermined the economies of scale. By distributing the land in such small parcels, it has made farmers unable to earn enough to support their families. An audit of beneficiary farms left idle must be done and a solution found to encourage cultivation.

This is a Gordian Knot of a problem: Abolishing the NFA will probably kill our rice production (or raise prices until a revolution breaks out). Retaining the NFA will mean a ballooning and uncontrollable budget deficit that will kill the rest of the economy.

Instead of complaining about the really negligible amount of spoiled rice stocks or constantly entertaining us about “swimming” in rice, Banayo should now impress us with a plan about what to do with this problematic agency.

No one is now willing to lend more money to the NFA without a sovereign guarantee — which in turn adds to our contingent liability and our national debt stock. This agency can single-handedly raze our long-term economic prospects. It cannot even plan its import schedule because it does not know exactly how much stock there is in the open market due to rampant smuggling of the commodity.

Pray tell, Lito, how the Gordian Knot will be cut — and when.