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

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