Stop Hoarding Rice - It Only Hurts You.

Article contributor Yeo Teck Wei is a freelance writer based in Singapore.

Despite being a rice producing country, the Philippines is not spared from the price hike in rice.

But this crisis is not all it seems. As what Agriculture Secretary Arthur Yap told BBC, “There’s no shortage…the problem is not with supplies, but with price.”
“And when you consider that 80% of our population spends 60% of their income on food, and 40% of that is on rice, it is very serious.”

By hoarding rice, consumers are actually pushing the price of rice even higher by increasing demand. Furthermore, unscrupulous suppliers will also make use of this crisis to increase thier profits.

Why do people hoard rice?
Ordinary households hoard rice for two reasons.

1. To ensure there is no shortage of rice in the household.
2. To avoid impending price hikes.

In short, consumers hoard rice for the perceived sense of food security. And yes, there will be so-called “food security” for these people in the short run. However, how will these people be affected in the long run? A demand & supply analysis is used to illustrate the long-run effects.

Demand-side argument

Out of fear of impending future hikes, consumers decide to buy more rice than they need. As a result, the rice market sees a rise in speculative demand for rice from consumers. This means that the quantity of rice bought is not equal to quantity of rice actually consumed.

Due to the increase in speculative demand, the total quantity of rice asked increases. As a result, producers will increase price to maximize profits. Hence, rice prices increase because of an increase in consumers speculative demand.

Supply-side argument

To cope with the increase in demand for rice, producers/governments have two ways to do this:

1. Draw from existing rice stockpiles/reserves and sell the surplus.
2. Increase rice production.

Regardless of which measure producers/governements choose to adopt, the price of rice will still increase. Why?

Most varieties of rice need an average of 3-6 months to grow before they can be harvested. The increase in opportunity cost for growing more rice (i.e. the time could have been used to grow other food crops, the additional labor used for harvesting more rice etc.) will justify the producers in increasing the price of rice further when it sells the new harvest.

If producers were to draw from existing rice stockpiles, technically they do not need to produce more rice, but then the cost of hiring labor to deliver rice from the storage warehouses to the market will still give producers an incentive to increase price to minimize their operating costs.

Conclusion

The above two arguments prove that hoarding rice will only result in future rice price hikes. As a result rice, hoarding should be discouraged as it only harms society in the long run.

The consumers who have hoarded rice in won't be spared from price hikes. Given the fact that brown rice can only be stored for 6 months in average conditions, and the common occurrences of natural pests such as rice weevils, consumers cannot expect their own stockpile of rice to last very long.

What the individual can do instead

Here are some pointers to what you can do, to prepare yourself for the impending price hike:

1. Gradually reduce and ration your rice intake.
2. Start eating alternatives in greater portions during meals, such as potatoes or cereals.
3. Take the initiative and upgrade your work skills, so that you have more income and can cope better with the price hikes.

The aftermath

Many people have the misconception that the current price hike is due to a significant fall in the rice supply. However, few realize that the current price hike of rice also highlights the vast income inequality in the population that many nations face.

As reported by the Inquirer, in a recent privilege speech, Sen. Edgardo Angara, agriculture secretary in the Estrada administration, said, “The difficulty is not the supply, but the purchasing power of the people.”

He said, “Almost 40 percent of our people subsist on less than $2 a day, the poorest on less than a dollar a day. Those people cannot afford to buy rice and rice is one-half of the food budget. That's where the safety net must be put.”

This means that since consumers can't change the way rice is priced, they can do the next best alternative; to try and increase their income instead. This will mean upgrading their existing working skills so as to supplement their current income until the situation improves. Otherwise it seems that the man on the street can do better than to grit their teeth and continue to plough on in life.

Summary

1. Hoarding rice is an ineffective way to cope with the current price hikes.

2. Do not listen to market speculations and fear, because they are the factors that now prompts even greater price hikes.