Bulatlat

If there is no shortage, locally and internationally, and no compelling reason for the increases in rice prices and yet it is happening then somebody is making a hefty profit out of it at the expense of the majority of the Filipino people.

As I have written in my previous analysis of the rice crisis, there is no shortage and yet prices are increasing.  In fact, a trader quoted by the Philippine Daily Inquirer (PDI), in a four-part special report by Fernando del Mundo, “Most Filipinos ignored warnings of a ‘perfect storm’”,  claimed that if one has a bag of money, s/he could buy as much rice as s/he wants.  A news report of ABS-CBN last week reported that rice grains in Nueva Ecija are rotting because traders do not want to buy rice for fear of being charged with hoarding rice.  But rice prices are increasing.  

Why?

Isn’t it that the law of supply and demand - the god of classical, neoliberal economics - dictates that when supply is abundant, the price is low?

The Arroyo government is accusing the rice cartel of hoarding stocks to profit from price spikes.  President Arroyo, herself, has directed the National Bureau of Investigation to focus on running after rice hoarders, not smugglers.

Traders, on the other hand, are blaming “unscrupulous elements in the state-owned NFA” of trying to make money by making it appear that there is a shortage.  On the other hand, former House Speaker Jose de Venecia Jr pointed out that the Arroyo government is profiting from the supposed shortage as increased rice imports means more money lining the pockets of government officials to the tune of $50 per ton or $105 million dollars for the 2.1 million metric tons to be imported.  

International production, consumption, and prices

The same PDI special report also quoted a warning by UN Secretary General Ban Ki-moon in a March 12 article in the Washington Post that the world was “facing a perfect storm of new challenges,” pointing out that prices of wheat, corn and rice increased by as much as 50 percent or more in the past six months and cereal stocks dropped to record lows. In explaining the spikes in food prices, the Asian Development Bank reportedly said that population growth in 2007 was higher than the growth in rice production for the same year.  

Statistics released by the FAO, however, showed that world production of rice and wheat have consistently increased. Rice production increased from 161,183,000 metric tons in 1948-50 to 472,687,000 metric tons in 1985. By the beginning of the 1990s, according to UNCTAD, rice production was at approximately 350 million metric tons. It was 410 million metric tons by the end of the century.  It approximated 387 million tons of milled rice in 2002 and 395 million tons in 2003.   By 2007, according to data from the International Rice Research Institute, it has reached 645 million metric tons.  

World rice consumption, according to the UNCTAD report, increased 40 percent in the last 30 years from 61.5 kg per capita to 85.9 kg per capita.  But this is more than compensated by the increase in rice production by 73 percent from 1977 at 372,261,000 tons to 2007, which is at 645 million tons.  

So there is really no urgent reason for rice prices to increase in the world market.  The rice price spikes seem to stem from speculation.  In the U.S., according to a report by GMANews.TV, the price of rice, at commodity futures markets, in contracts for delivery in July, jumped by 62 cents “as investors bet that surging world demand will continue to pressure already dwindling stockpiles” (italics mine).

It is worth noting that only 5 to 6 percent of world rice production is traded internationally. More than 95 percent of the rice produced is consumed by the producing countries themselves.  The implication is that prices of rice in the international market could not and should not impact significantly on local prices because it constituted a very small percentage of local consumption.

Another point worth pondering is that: why did the Philippines, an agricultural and rice producing country, become one of the top importers of rice?  The Philippines is planning to import 2.1 million metric tons this year surpassed only by the 2.3 metric tons average rice imports of Indonesia - the 4th most populous country in the world- from 1998-2002.  The Philippines was not even listed by UNCTAD as among the main importers of rice from 1998-2002.

Has production gone that bad or is someone making money out of rice imports?  In both situations, the Arroyo government is to blame: either it let local rice production deteriorate so badly or it is making money out of imports as former Speaker Jose de Venecia has revealed.

Disgusting

If there is no shortage, locally and internationally, and no compelling reason for the increases in rice prices and yet it is happening then somebody is making a hefty profit out of it at the expense of the majority of the Filipino people.  

For how can the 65 million Filipinos who, according to IBON Foundation, live on P96 ($2.28 at an exchange rate of $1=P42.04) or less per day, afford rice now costing more than P40 ($0.95) per kilo?  Moreso, how can the poorest 5.2 million households whose incomes are chronically insufficient for their spending afford the increases in rice prices?

That is why more and more people line up under the scorching sun to be able to buy rice at the subsidized price of P18.25 ($0.43) per kilo.  And this is not even enough as subsidized rice being sold by NFA outlets is very limited.  Most are forced to either buy commercial rice, which they cannot afford, or cut down their consumption of rice, the staple of Filipinos.  

Profiteering amid widespread hunger and poverty is terribly disgusting and we should not allow this to continue. Better still, we should not let this government, which is responsible for the worsening poverty and for making it possible for unscrupulous elements, local and foreign, from within and outside the government to profit from the people’s desperate situation, to continue.  Bulatlat