All about the Rice Shortage


Contrary to what everyone believes, the country's rice shortage actually started way back the year 1870 when the Philippines first imported rice. The practice continued except for 2-3 years under the term of President Marcos, when the Philippine actually exported rice. But other than that, domestic production has always been short of the local demand and the country has always been a net importer.

Despite that, experts declare that the country is not lagging in terms of rice productivity. Philippine farmlands harvest much more rice (per hectare) compared to other countries. The problem is there isn't enough land in the country being planted with rice. At the moment, it only has 4.2 Million hectares of land devoted to rice production and out of that, only 1.4 million hectares are irrigated. All in all, the country produces 11.2 million Metric Tons (MT) per year and there is still a rice shortage of about 2.2 million MT for 2008.

This problem is further compounded by the country's rice consuming population which has grown tremendously over the past years. A UP professor argues that had the country managed its population growth well since the 1970's, it would have had a few million metric tons of excess production by this time. That would have made the Philippines a major rice exporter.

History of Rice Shortage (2008)

Going to the current food crisis, the present rice shortage started when international traders increased their offer prices due to an expected decline in global production (2008). Some of the country's regular suppliers gave notice that they will have to decrease their export allocation for 2008 due to projected low harvest that are being blamed for pestilence and climate change. By February 2008, rice was being traded at $500/MT, a 54% increase from the previous year's price ($325/MT). Such a trend continued and resulted to more problems everywhere. In the rice exporting country of India, local prices also grew by leaps and bounds because traders started exporting to take advantage of rising world prices. This resulted to a shortage within India and rice prices grew despite their own surplus. Come March, some exporting countries like Egypt and India banned rice exports in order to arrest its rising domestic prices and this resulted to more anxiety for importing countries.

When the Philippines, the largest rice importer, went to the market for its regular requirement, offers have grown to more than $1,000/MT. Knowing that a serious shortage can cause food riots and an overthrow of existing governments, like what happened in Haiti, the Philippine government had no choice but to buy at whatever prices were offered and sell it at the old retail prices. This made the government lose heavily because of the subsidies.

At every point in 2008, the country had enough rice supply in its warehouses. Imported rice reached the country and local production actually increased. Despite that, retail prices in the country increased drastically and long lines for government subsidized NFA rice had become a regular occurrence. This can partly be blamed to the unrestrained street parliamentarians and media coverage which sowed fear and anxiety to the mostly poor population.

In the exporting countries, production has turned out to be not as bad as projected and today, Vietnam has agreed to supply the Philippines whenever it needs rice. In addition, Japan is preparing to tap into its gold mountains of rice to be able to supply to the Philippines. Thailand has also joined the bandwagon. Despite that, local prices continue to increase.

Solutions to the Present Rice Shortage

As mentioned in this site, in a number of related articles, the people should realize that they can actually plant their own food, offshore rice production and invest more in infrastructures that will result to higher yield and lower production costs. On the demand side, the rice eating population's growth should be managed well. The people should also learn to shift to more nutritious and cheaper alternatives like Yam (kamote). Because every increase in production efficiency will not be meaningful if the demand will keep on outpacing the supply.


Solutions to the Philippine Rice Problem

This is a continuation of the article “The Current Philippine Rice Situation“.

The solution to the Philippine rice problem is a combination of several ideas, the top four of which are discussed below. If the Philippines will be able to successfully implement the three proposals, nothing less than a sustained supply can be expected. Let us start with the immediate solutions.

Free for all rice importation and removal of tariffs, VAT, etc.. At this point, the government charges rice imports a tariff of 40~50% and a value added tax of 12%. Because of that, the price of imported rice is very high. A removal of tariff, tax and other restrictions (quota) on rice imports will encourage more businessmen to bring in the commodity. With more imported rice coming in, hoarders will be forced to sell their stocks, thus creating a free flow of the commodity in the local market. Such move will also spare the government from having to import rice and will save the taxpayers approximately P22.Billion ($549 M) for every one million metric tons of rice that it imports .

Countertrade. If ever the Philippine government needs to import rice, it should avoid the speculator infested futures market. Instead, it should go for government to government transactions and go further by using countertrade. For instance, mangoes, bananas and finished articles of clothing may be sent as payment in exchange for rice. Countertrade has successfully been used by the Philippines to procure armored personnel carriers and many other items in the past. Countertrade will spare the government from high international commodity prices while promoting local products.


Control Population Growth. An increase in the country's rice production will be meaningless if the population problem is not addressed. According to reports, the number of Filipinos grew by more than 10 million within the past 10 years. UP professor Pernia points out that had our population grown parallel to Thailand's, the demand for rice would not have reached the present level. And with the current level of production, the Philippines would have been in surplus. If the country's birth rate will not decrease, it will have to continue increasing production and/or continue importing more and more rice every year.

Promote the Use of Rice Alternatives. Arresting population growth, increasing rice production, lowering rice production costs, and many other measures will all be gone to naught if people will still be dependent upon rice. Production problems like typhoons, pestilence and a lot of things that can go wrong will go wrong. Especially now that global warming is believed to have actually arrived and creating havoc in rice exporting countries, it is but a matter of time before it hits the Philippines.

People don't really need rice. The only reason there's this hullabaloo right now is that the people of the Philippines are psychologically conditioned not be complete without it. As mentioned repeatedly in this website, the cultural and psychological values that rice have, far outweigh its nutritional value. Alternatives like Kamote (sweet potato), for instance, is cheaper, easier to cultivate, resistant to typhoons. Kamote can be eaten as a standalone dish, and has lots of vitamins and antioxidants that rice doesn't have.

Related Article: Government may lose up to P22B in rice subsidies

The Current Philippine Rice Situation

Compared to the more nutritious, cheaper and easily obtainable alternatives, rice has taken the center stage in today's commodity markets, even temporarily dislodging petroleum as the hottest issue. Despite rice shortage being largely imaginary up to this point, the speculative world has started to adversely react. Its world market price rose by more than 50% within a month and is threatening to increase further within the coming days.

To increase domestic supply, the Philippine government is thinking of increasing farm subsidies for rice farmers as well as the consumers by buying farm produce at higher prices for distribution at heavily subsidized prices. At least temporarily, it is also considering the issuance of cash stubs to the poorest families.

With such moves, the Philippine government can be expected to let go of a sizable portion of precious currency that will most probably lead to more foreign loans, delay in repayment of existing ones and push back its dream of a balanced annual budget.

All of that for a commodity more important for its traditional and psychological values than actual nutritional content. Yes, people can actually live and even be healthier without rice.

With the government seeming to be bent on continuously subsidizing rice, its price in the futures market will continue to increase and cause severe strains in the country's foreign currency reserves. That will lead to an increase in the local dollar rates which will further be worsened by increases in the price of crude oil that the Philippines buy using the US dollar.

At this point, government subsidized NFA rice is now getting huge attention and has resulted to long queues of buyers, suspected massive hoarding, intensified smuggling and a loud public outcry. To better manage the distribution of rice, the Philippine government will be issuing rice cards to be used by people whenever they buy the commodity. Such a move intended to prevent hoarding has resurrected problems that were previously associated only with government elections- the issuance of cards to people that were long dead and to those that, in reality, do not exist.

In addition, the national government is also dead set to the removal of NFA rice outlets from public markets to prevent traders from repacking and selling it as part of the more expensive varieties. Though seemingly sound, such move will most probably give birth to corruption by people managing the issuance of the cards as well as syndicates that will divert stocks from government distribution centers to private warehouses. The hijacked inventory will be repacked and sold in public markets at high prices.

One also need not think hard to determine that having only a few distribution centers that will cater to majority of the country's 15 million families will lead to longer queues and an explosive atmosphere. Should the government do that, the country will simply be duplicating Haiti's food riots that brought down the national government.

Next Issue:
Solutions to the Philippine Rice Problem

All about the Rice Shortage