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Rice prices soar due to Aquino govt bungling

The price of rice, the Filipino staple food, has soared to P42.50 per kilo, a level seen only during periods of crisis for global rice and other commodities.

The P40/kilo level was last breached in 2008-2009 and earlier, in 1972-1973. But that was because of a global commodity crisis not only for rice, but all agricultural products. It was in turn caused by an oil price surge and the ensuing market panic. No government in the world would dare risk shortfalls in their country’s staple food, so they worsened the situation then by restricting their rice exports.

In the present case, though, it is sheer bungling by the administration of President Aquino. He has claimed, and the yellow media has duly reported, that the Philippines has achieved self-sufficiency in rice.

Aquino’s favorite punching bag, former President Arroyo saw rice prices increase in 2008-2009 because of the global commodity crisis. However, prices of the staple during President Arroyo’s term averaged P34.20 per kilo. The P42.50 per kilo of rice under Aquino today means a huge 25 percent increase.

Aquino’s appointee, National Food Authority administrator Lito Banayo in 2011 had even claimed that the previous government had “foolishly” imported so much rice and made allegations of corruption that he couldn’t prove.

What Banayo of course didn’t mention—or couldn’t comprehend—was that the global rice crisis erupted starting late 2007, and without imports, the Philippine domestic market would have seen a massive shortage.

Aquino’s officials were mesmerized into believing that rice production was better than reflected in statistics since rice prices were in fact stable, and even falling.

What these dunces didn’t realize was that there was massive smuggling of rice from Vietnam and Thailand, that in one celebrated case, the rice shipment of an entire ship disappeared after docking in the Batangas port and leaving for Cebu.

In December 2012, I wrote a column at the Philippine Daily Inquirer entitled, “Rice smuggling explodes under Aquino”, in which my analysis of the International Monetary Fund’s trade figures showed that smuggled rice from Thailand could have reached a staggering P16 billion in Aquino’s two years in office.

Then Bureau of Customs head Ruffy Biazon denied my claims, with his successor though later filing a barrage of criminal charges against those he identified as the notorious rice smugglers.

Aquino’s agriculture officials did not realize what would happen if the Bureau of Customs finally found their balls and started cracking down on rice smugglers. Naturally, the supply decreased and the idiots at the National Food Authority had not started negotiations for rice purchases.

In the meantime, the US Department of Agriculture—known for its very accurate estimates of the supply of agricultural products around the world—had released its regular reports in which one table showed that contrary to Aquino’s claims of self-sufficiency, the Philippines would have to import 2 million tons this year. This is nearly double the 1.1 million metric tons imported last year and 600,000 more than the government announced it would import this year.

International traders of course knew what that meant: it’s a suppliers’ market for the Philippines, and they could bid up their prices. As a result, the NFA has been struggling to order rice at such high prices and which can only result in the P42/kilo levels that we are seeing at the local market right now.

The website www.oryza.com (“oryza,” the Greek word for rice is the botanical term for rice) of the world’s rice market, in its article dated June 5, called the global industry’s attention to our quagmire:

“A study by the Philippine Institute for Development Studies (PIDS) found that a decline in official rice imports led to a surge in rice prices during 2013, not price manipulation by rice cartels. However, rice smuggling in the Philippines continues to run rampant thanks to the huge difference in global rice prices and local rice prices, and a reduction in official imports under the nation’s rice self­sufficiency efforts.”

While the Philippines tried to reduce imports in hopes of boosting local production, the result was smuggled rice imports AND higher prices.

PIDS researchers said the average domestic prices of milled rice increased to P34.16 per kilogram (around $764 per ton) in December 2013, up about 15 percent from P29.81 per kilogram (around $664 per ton) in January 2013, based on data from the Philippine Bureau of Agricultural Statistics (BAS).

Over the same period, the Oryza White Rice Index fell about 5 percent from about $475 per ton FOB in January 2013 to about $450 per ton in December 2013.

The National Food Authority (NFA) imported only 205,700 tons in 2013, down about 76 percent from about 843,700 tons imported in 2012 due to the rice “self-­sufficiency program” initiated by the government. The program aimed at 100 percent self­ sufficiency in rice production in 2013.

Reduced imports and natural calamities put further upward pressure on Philippine rice prices.

Trade sources said unofficial imports reached a staggering 1 million tons in 2013. The surge in prices and rampant smuggling led the government to reconsider its decision on reducing rice imports in 2014.

The NFA will be importing 800,000 tons of rice from Vietnam between May and August 2014 to maintain buffer stocks and control price hikes. However, Vietnam rice exporters are reluctant to fulfill the tender as Vietnam rice prices rose after the tender was announced.

USDA estimated the Philippines will import around 2 million tons of rice in 2014, including unofficial imports, while the UN’s Food and Agricultural Organization (FAO) estimated it will import around 1.2 million tons.”

The Aquino government’s handling of the rice industry is ineptness of a criminal magnitude. For the poorest, rice is basically what keeps them alive, and surveys show that it accounts for 30 to 50 percent of what they spend.

Yet the bungling by Aquino and his officials have increased the cost of rice, for the average Filipino, by 20 percent from its average cost since 1972.