The inflation rate for March was higher than expected. This will have consequences for reduction of interest rates we need to spur economic activity.
Rep. Joey Salceda notes that the slight increase in the inflation rate is all about rice. Surging prices for the staple cereal fuels inflation in our economy. As a result, while our growth rate may be higher than most in the region, our inflation rate will continue to be among the highest as well.
Without the abnormally high prices for rice, Salceda estimates that our inflation rate would be at a more tolerable 3.1 percent. For March, food inflation accounted for 57 percent of total inflation.
Continuing high food inflation is the principal reason for the declining approval rates of the President. President Marcos understood this well. This is the reason he held the agriculture portfolio concurrently for over a year. This, however, did not produce anything dramatic by way of improving our agricultural productivity.
Rice is our most politically sensitive agricultural commodity. This is the reason why, over the years, government evolved numerous programs delivering state support for our rice farmers. All these programs notwithstanding, the country has gradually climbed to the status of the world’s biggest rice importer.
This year, Agriculture Secretary Laurel has ramped up government support for our rice farmers. A total of P12 billion in financial assistance to our rice farmers is set to be distributed by June, in time for the onset of the planting season. Government is also distributing farm machinery to farmers.
Despite the volume of subsidies extended to our rice production, the price of the commodity continues to climb. The El Niño weather phenomenon adds to our woes. Nearly all our major agricultural regions are currently suffering from drought.
Even as most of our arable land, irrigation systems and warehousing support are devoted to support rice production, the price of the commodity continues to rise. We need a radical reconfiguration of how we support rice productivity.
Our rice production is immune to all the subsidies and credit programs organized by government. It will continue to be inefficient unless we consolidate and industrialize our farmlands. This sector remains trapped in subsistence mode. We use basically the same technologies and social organizations from the time when our population was under 20 million.
With basically the same farm organization in place, all the subsidies will have limited impact. We can only produce so much rice that, as our population approaches 130 million, we will be importing more and more of our staple food.
We might learn from Ukraine. This country of 40 million (now much less because of Russian aggression) produces enough grain to feed more than ten times its population. Despite the exigencies of war, Ukraine continues to export its grain. Most of the Middle Eastern countries and sub-Saharan Africa depend on Ukrainian produce.
The reason Ukrainian agriculture is so strong is that it is throughly mechanized. While we speak of nurturing our agro-industry, Ukraine has fully industrialized its agriculture.
We need to think in roughly the same terms when we try and reimagine our agricultural modernization. We need, most urgently, to extract our rice production from subsistence mode and bring it to industrial mode. Until we begin doing that, we will continue importing more and more while domestic production costs rise.
The main reason our rice production is so inefficient is that we broke up and subdivided our farmland instead of consolidating farm activity. The subdivision of our farmland was dictated, not by agricultural economics, but by some romantic notion of social justice.
Social justice, to be sure, is not served by an expensive food price regime. This is the source of poverty and malnutrition in our society. Today expensive food causes stunting among our young and malnutrition among the total population.
We cannot continue breaking up our farmland and expect our agriculture to suddenly become robust. An inefficient farm organization will continue to push up production costs and keep food prices beyond reach.
But how do we move away from the much vaunted agrarian reform program?
In the decades we pursued agrarian reform, we reaped only rural poverty and, hence, massive rural-to-urban migration. Our agriculture just kept failing us year after year. Today, in addition to importing more rice, we import onions, garlic and upland vegetables.
It used to be that criminal syndicates smuggled cigarettes and industrial goods. Now they smuggle rice and vegetables. There can be no more telling indictment of the extent to which our agriculture has failed us.
Agrarian reform sabotaged our agriculture. It made our production systems inefficient and insulated our agriculture from investments. The land redistribution program pushed up the cost of land for other uses such as industry and housing, creating massive homelessness and discouraging commercial investments.
In order to convert agricultural land to other uses, property developers have to bribe the gatekeepers of the agrarian reform program. These gatekeepers would lose illicit revenues if we liberalized land use.
Unless we are able to consolidate agricultural production, we cannot mechanize it. We cannot make it more cost efficient. We cannot attract investment flows to improve on our land productivity.
In a broader sense, we cannot modernize the whole economy on the back of subsistence agriculture. Our agriculture becomes a weak foundation that will collapse all the edifices of a modern economy.
Sadly, agrarian reform, for all its failings, retains its status as some sort of civic religion.