Category: rice

Bigas, Koryente, Gasolina — pamahal nang pamahal

Good to know that we are not imagining it, that government’s inflation figure — 3.8% in April — hardly reflects the inflation that the common tao struggles with on a daily basis in terms of the increase in prices, year on year, of daily essentials rice, electricity, and gasoline,

‘IN-OUR-FACE’ INFLATION
By Orlando Roncesvalles
Letter from Dumaguete

Rice, electricity, and gasoline

Electricity bills can shock, like the live wires in the 220-volt outlets. Doomsayers will have a field day, and cynics will peddle conspiracy theories even as we experience de rigeur brownouts. We need a superhero to deal with a blooming power crisis. Hmmm. We need a cha-cha fix.

The Dumaguete MetroPost reports that Noreco I and II bills show residential electricity has reached P14 to P16 per kilowatt hour, up by P0.87 and P1.40 from the previous month. The news raises questions about affordability and whether alternative sources such as residential solar energy or ‘mini’ nuclear reactors are viable solutions. The latest editorial in the paper advocates energy conservation measures. It left out going to a porch or veranda with a nice cold cocktail. The better to forget.

The bill shock is a ‘perfect storm’ brewed from seasonal demand and a higher supply price. These two phenomena reinforce each other, leading to a ‘double whammy.’ A third whammy is on the way. Why? Because bad luck comes in threes. Surely, I jest. Keep your fingers crossed on two.

A national official blames “the pass-through cost from the power suppliers.” The pass-through cost shows up as ‘generation cost’ in our electricity bills. This raises a more challenging question: Why are generation costs higher? Noreco II explains that these costs follow a seasonal pattern, rising in the summer and falling later in the year.

But there is no denying that electricity prices have risen. For decades, the story behind electricity prices has remained complicated. Is there too little supply? Yes. Do the power producers compete to lower the price? A few players dominate the market. Is there a problem of red tape that inhibits the entry of more players? Yes. Has government regulation over distribution utilities cut the costs charged to the consumer? We’re still determining. Is the exchange rate a factor? Only sometimes, because the peso fluctuates. Are prices sensitive to imported inputs? Yes.

The inflation issue isn’t just related to finances. It is also psychological. We are creatures of habit. The P500 bill was yellow and comfortable. The polymerized blue P1,000 bill has now become more commonplace. The value of daily transactions has risen faster than monthly incomes. We wish we were like the Argentines who bravely lived with inflation. Or like Henry Higgins getting accustomed to Eliza Doolittle’s face in My Fair Lady. Some search for an antidote in the crypto rabbit hole. The economists say it’s just another tax we cannot evade. Pay it and forget it.

While the educated elite may find an uneasy peace with the official inflation rate (see below), the common tao struggles. He can feel the prices of rice, electricity, and gasoline. These three commodities — called necessities — figure prominently in his limited budget. A measure of inflation focused on these goods is one that we can label as ‘anecdotal’ or ‘memorable.’ The number we get will stick to our brain cells even if the official inflation number does not.

The year-on-year price increase for rice was 21% in May. Local well-milled rice sold for P51.42/kg, compared with P42.50/kg a year ago. For electricity, the local utility (Noreco II) set the residential power rate at P14/kWh, compared with P12.79 in May 2023. This gives an electricity inflation rate of about 9.5%. Gasoline in the Philippines sold for P64.40/liter in May versus P59 a year ago. The gas inflation rate is about 9%. A simple average of these inflation rates is 13%. This memorable inflation rate is unbearably high. (Interestingly, the official inflation rate is much lower at 3.8% in April.)

But what accounts for the disconnect between the low official inflation rate and the high one for the ‘survival’ commodities? One possibility is that the prices of other consumer goods have not risen much or may even have declined. Someone from the Philippine Statistics Authority can explain. A further explanation is that the prices of these three goods are very volatile.

Does the disconnect even matter? Yes, for government officials who have to decide on mandated wage levels. The same goes for political leaders with a support base in the C-E classes. These voters suffer the most with memorable inflation. Economic managers also have to pay attention to the disconnect. They may become complacent with the low official inflation and urge the Bangko Sentral to cut interest rates prematurely.

The disconnect and both types of inflation will inevitably disappear. This is because economists assume or expect the relative prices between various goods to stabilize in the long run. The question of how long before both inflations converge is nonetheless uncharted territory. The answer will depend on how persistent the short-run factors, such as ‘shocks’ and ‘policy mistakes,’ are.

Can we forecast the inflation rate for the three goods in the next few months?

According to economists at the World Bank, the global rice market has been tightening. This is due to a ‘Niño’ effect and to export restrictions by the major rice-producing countries. Unless the government decides to subsidize the retail price or reduce the import duty on rice, we are in for a rough ride. Proposals to allow more rice imports will do little to reduce the local price. But at least there would be supply. So, no long lines to buy rice.

The world oil market and the peso-dollar exchange rate drive gasoline inflation. Even if the world price were to stabilize, the peso has lately been falling. For thinking purposes, we assume that the exchange rate stays where it is. The so-called ‘base effects’ will give us the near-term inflation rate in this scenario. Base effects mean that the inflation rate is calculated using current prices (P64/liter) compared with the average June through August 2023 price of P63.8/liter. This means that we can project a zero inflation rate for gasoline. Good news!

Electricity is more of a mystery. Taxes and subsidies can shift the balance between demand and supply. So can rule changes for the major players in the evolving electricity market. The entry of solar energy has ramped up with technological advances and lower prices for solar panels. At the same time, it is still government policy to push for economic growth. The net effect on the price level is possibly a wash, similar to what we might project for gasoline.

Electricity pricing by Noreco II could stabilize at P14/kWh. The base effect suggests an inflation rate of 12% (from an average price of P12.47/kWh for June-August 2023).

An approximate ‘base effect’ inflation projection for the three products in the next three months would be around 8%. This is based on zero inflation for gasoline and 12% for electricity and rice. Such a projection assumes an unchanged peso-dollar exchange rate. I surmise that inflation will remain persistent, like a disease that requires a lifestyle change.

All is never lost. Containing memorable inflation is no pipe dream. We can do our civic duty by changing our bad habits. Rice makes us fat anyway. We can reset the thermostats on our air conditioners and walk or ride bicycles. Our local governments can build nice sidewalks and bike lanes. We can also pray that the peso will strengthen. Civics are good. Honda thought so.

Some suggest that the government should impose price controls or targets. Never mind that such policies require subsidies and new taxes. They can also result in shortages and long lines. Will that be politically correct? Will the voters in next year’s election care? Time will tell. Space doesn’t know.

The Stoics claim that what matters is the line between things we can and cannot control. Aside from a renewal of civic virtues, memorable inflation is beyond our human ken. That is the province of gods, statesmen, and legislators. The official inflation rate is less problematic. It will remain within the 2-4% target range that the Bangko Sentral has set. That promise is easy enough to keep, especially if memorable inflation dissipates.

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Author’s email: ORoncesval4@gmail.com; Twitter: @ORoncesvalles

Rice and (r)evolution

May tatlong buwan ko nang nire-research at binubuno in my head itong problema natin sa supply at presyo ng bigas. Di ako matuwa sa mga panukala na bawasan na lang natin ang konsumo natin ng kanin — either haluan ng corn grits (70% rice – 30 % corn) or “Let them eat kamote?” na mas healthy daw.

PHILSTAR EDITORIAL. Sweet potato and white corn, however, are more expensive than the most affordable rice. There are varieties of imported sweet potato that retail for P130 to P150 a kilo. https://www.philstar.com/opinion/2023/08/18/2289509/editorial-let-them-eat-kamote

And then there’s the House Bill that seeks to mandate one-half cup rice serving in restaurants and karinderias to minimize wastage. But how much difference will that make for the majority of Filipinos, the self-rated poor and borderline poor Pinoys (some 70 % of the population, acc to surveys) who are now said to be eating less — many going hungry intermittently — because rice and other food are soooo expensive.  Surely they are not the ones who are wasting, or are sick of, rice.

But then I read Boo Chanco‘s Philstar column, “Looming Crisis,” and I changed my mind about half-cup rice, if only to help send the message loud and clear that the situation is dire.

…  PhilRice estimated that we waste P7.2 billion worth of rice yearly. The proposal to require restaurants to serve half the usual cup of rice and no more unli rice is a good way of demonstrating to the public we have a problem, and everyone must help mitigate the bad effects.

Pretty obvious is the reality that contrary to government claims, the current harvest produced much less than expected. Farmers used less fertilizer because they couldn’t afford the higher price following the Ukraine war. Government fertilizer assistance came after the planting started. There were also reported pest attacks. And, of course, the weather. https://www.philstar.com/

It’s a perennial problem, the chronic rice shortage, na since the 1870s pa, according to Prof. Filomeno V. Aguilar Jr. in Rice and Magic | A Cultural History from the Precolonial World to the Present. And the solution, even then, and ever after, has been to import rice from elsewhere in Asia.

… One reason for the rice deficiency was the shift in productive land and labor from rice to export crops, such as sugar and abaca, as specific provinces and regions pursued crop specialization. As [Benito] Legarda … has pointed out, “The loss of one rice-producing region would have meant little in a country where there were other rice-surplus regions and where new lands were being opened and agricultural production was on the increase, provided this increase were in basic food crops” but this condition was not met. Rather, the opening of new land was meant for other crops, and even land that had been devoted to rice was diverted to other crops. With the availability of Saigon rice and the liberalization of the rice trade, there occurred a growing reliance on rice imports, which made the country susceptible to drastic swings in supply and prices in the world market. [Ateneo Univ Philippine Studies Journal  2013]

Amazing that after more than a century, from one occupation to the next, then from republic to republic, hindi pa rin nasosolusyunan ang chronic rice shortage. Madali kasing isisi sa bad weather and mga peste, even, sa land reform and population growth? Easier yet, and sometimes cheaper, to import na lang tuwing nagkukulang? Not that this has ever been articulated as policy. Read “Politics, economics, rice” by Prof. Orlando Roncesvalles of Siliman U. https://foolawecon.wordpress.com/

The official line has been that we aimed for the three goals of self-sufficiency, high incomes for rice farmers, and affordable prices for consumers. What has been unsaid is that these goals are basically incompatible. Without a gigantic leap in domestic productivity, only the last of these goals could be attained, and only if the rice-exporting countries (such as Vietnam and Thailand) were to sell rice on the cheap.

And now that Vietnam and Thailand and India, from where we got 90% of  our rice imports in 2022, are exporting less — inuuna kasi ang growing demands of their own growing populations — it’s obviously time we stop relying on imports. https://www.pna.gov.ph/

Here’s Ricelander, virtual friend from the “golden days” of blogging in GMA’s time, who knows whereof he speaks:

Rice production is dependent on water.  Many of our farm lands to this day still depend on rainwater a lot, so much of rice production is still done during rainy season when it’s also the season of destructive floods and typhoons.  And during dry season, without ample water, where no irrigation exists, rice production is impossible, in fact much of our farms are idle then. If I were the President, my first priority would be irrigation: 100% of all agricultural land should be irrigable land. Give the farmer water and the rest will follow smoothly.  No technology assistance, financial assistance etc. would make any difference otherwise.

The advantage of the top rice producing countries is actually their great rivers flowing with ample water all year round.  Some experts claim that because we are an archipelago, and consequently having no great river systems comparable, we could never be competitive in agriculture.  Economists typically discourage giving priority to economic activity where comparative advantage is not achievable, i think this mindset somehow impaired sustained agricultural development for some time.  Establishing dams and irrigation systems of course is a hugely expensive, so…  We are realizing belatedly that food importation could get restrictive and expensive, so with comparative advantage or not, we should strive to produce our own.

Finally, I think we should start learning to eat lesser rice.  Health experts are claiming it is one major reason of epidemic in diabetes anyway. :-) [Email Sept 2023]

Indeed, importation has gotten restrictive and expensive. And neither quotas (limits) nor tariffs (taxes) have raised, as promised, the earnings of rice farmers.

Roncesvalles: A tariff generates government revenues, which can be collected and then misused. A quota results in “windfall” profits for those given import licenses, and is said to be a major source of corruption. In short, either way, tariffs or quotas, we face the same inevitable temptations for the abuse of public office for private gain.

… Theoretically, the situation of the rice farmer is the same under either tariffs or quotas…. What has happened, and this has been documented by both the proponents and opponents of Rice Tariffication, is that rice farmers earn less under tariffs. The unanswered questions are: Why? Is the 35% tariff too low to make its effect equivalent to that of the quota system? Is it because there is a local cartel that can dictate a lower farm-gate price under tariffs than under the old quota system? If there is such a cartel, is it engaged in a form of retaliation because they lost some lucrative opportunities under the quota system? Can such a cartel continue to operate? What if there were a political will to dismantle such a cartel?

POLITICAL WILL

What if we do it the way our Asian neighbors do, as Inquirer columnst Jake Maderazo suggests in “P20/kilo is ‘doable’ if govt subsidizes farmer input.”

The plan is simple, government should pay for the fertilizer, chemicals and hybrid seedlings of our rice farmers like what’s happening in Thailand, Vietnam, and other countries.  In Vietnam, farmers spend only P5 to produce a kilo of palay while same thing happens to Thai farmers turning a higher P8 per kilo. Moreover, both are already into “mechanized” farming that prevents “losses” of their palay produce.  As of today, landed cost of Vietnamese Rice is about P29 to P31 per kilo while Thai rice is way higher.

… I still wonder why our past administrations have not supported our local farmers. Sadly, the Jokjok fertilizer scandal always comes to mind. But worldwide, nations subsidize their own farmers, not only because of wealth creation, but mainly on food security. I cannot see why pork barrel exists when these can be used to hand out free fertilizers, chemicals, pesticides, hybrid seedlings and modern post-harvest facilities for our farmers. [bold mine] https://opinion.inquirer.net/

Read also UP Prof. Rene Ofreneo‘s “Through a looking glass darkly”.

India, which roiled the global rice market, has aggressive protectionist policies such as export controls of certain products (e.g., rice, sugar and wheat), fertilizer subsidy and lower excise taxes for fuel used by the farmers. Thailand, a major rice exporter, also has price controls and gives their farmers fertilizer and fuel subsidy. Indonesia and Malaysia have very strong food protectionist policy. And so is China,  which is reported to maintain a buffer stock for cereals good for over half a year or so.  Even the import-dependent Singapore has imposed strict rules on its food importers such as the requirement for importers to source imports from over a hundred countries to minimize dependence on a few sources, the requirement for rice importers to maintain a rice buffer stock in government-designated warehouses, and a call for the citizenry to join the government in building food self-sufficiency (up to 30 percent in a city state with no agricultural land!) through vertical-rooftop agriculture.   https://businessmirror.com.ph

Nakakainggit sila. Samantala, dito sa atin, pinagtatalunan pa rin kung ano ba talaga ang sitwasyon at ano ba talaga ang solusyon. Read Philstar columnist Cito Beltran‘s “Untold stories”.

… there have been almost violent arguments between government officials concerning the actual state of palay and rice stocks.

On one side there are the long-term bureaucrats at the Department of Agriculture who have relied on traditional sources of data, historical observations and statistics collected from unverified, delayed and poorly updated reports. On the other side are farm practitioners, agricultural engineers as well as business owners engaged in the trading of rice and corn who use computers and drone technology.

The older bureaucrats anchor their confidence in a stable supply of palay and rice based on the traditional two to three annual harvests, multiplied by the historical land area or hectares planted to rice plus the usual importations that are done to augment any shortages. The introduction of the RTL or Rice Tariffication Law further added to their confidence, presuming that there would be a flood of rice as traders and importers would fill the void that occurred when RTL took away the authority of the NFA to buy or import rice as needed.

As confident as the older bureaucrats were, their “data” have not accurately studied the effects of climate change, global conflict resulting in inflationary effects on the price of fertilizers, seeds, transport, urbanization and land conversion. To quote a commercial farmer, “My budget for fertilizer used to fill a truck. Now I only need a pick-up because that’s all I can buy.” https://www.philstar.com/

Meron din daw mga LGU officials and other politicians na namimigay ng libreng bigas sa poor, pampapogi kumbaga, at meron ding nagbebenta sa presyong pinangako ni BBM.

Beltran: What President Bongbong Marcos could not achieve, Cebu Governor Gwen Garcia has done, selling rice at P20 per kilo. But here’s the catch: The rice was bought from the NFA at P25 and Cebu province subsidized the P5 difference.

SUBSIDIZE!  Read former Finance Sec. Gary Teves‘s “Combating the rice crisis.” He recommends, among others, that the president and the legislature fund rice farmers via LGUs. Hindi pautang sa farmers, rather, government pays part of the cost of producing rice in order to reduce prices.

At the local government level, promote a cofinancing mechanism that incentivizes local government units (LGUs) to provide more funding to rice programs. Under cofinancing, each peso an LGU invests in irrigation, post-harvest facilities, or other programs to support rice farmers will receive two to three times more matching fund from the national government. https://opinion.inquirer.net/

Sounds good to me. So does Agriculture Sec Francisco Tiu Laurel‘s promise to improve rice production and reduce post harvest losses through science and technology.

Tiu Laurel said the government “is moving with a sense of urgency” to widen irrigation coverage and set up more drying facilities and other infrastructures needed to boost rice yield.

“Ultimately, our aim is to minimize rice importation to achieve food security and sufficiency,” he said at the 35th National Rice R4D Conference in Nueva Ecija. https://www.pna.gov.ph/

I like the “sense of urgency.” There is no time to waste. People need relief ASAP from the high price of rice. Many still remember when rice was cheaper. Todd Sales Lucero in “Rice, Rice, Baby (Em)” traces the price increases over the years.

In 1974 a kilo of rice cost P1.70 – P1.90. It cost P6.10 – P6.40 by the early ’80s, P10 – P11 in ’99, P7.50 – P8.00 in the early 2000s, P25.67 – P39.76 in 2008, P39.49 – P44.02 in 2014, P43.12 – P45.83 in 2018, P30.00 – P42 in 2019. https://www.philstar.com/the-freeman/

Sana nakikinig ang gobyerno sa tumitinding daing ng nakararaming Pinoy, lalo na ngayon na nasa P62 ang isang kilo ng bigas sa palengke, yung klase na nakabihasnan na nila, ayon kay Mang Bador, our neighborhood handyman. Meron din daw P55/kilo pero may amoy at “malatâ”.

Clearly, it behooves government to address the problem with as much vigor, science, and funding as it is capable of. Otherwise, think the myth of let-them-eat-cake in a time of hunger that led to revolution. Think the infamous Marie Antoinette as symbol of decadent governance.

Roncesvalles: … when economics was not yet a social science, kings and despots already knew that to survive insurrections, they made sure that the price of bread or grain (or any food staple) was affordable to the masses. The Roman poet (Juvenal) considered on or around 100 AD that political stability required whoever was in power to provide bread, as well as circuses! Forget the Romans. The Bible has its share of stories where kings had the burden of protecting their subjects from suffering in times of famine.

And speaking of olden days. In pre-Spanish times, rice was not something we ate everyday because it was [still is] so labor-intensive to produce, relative to root crops.

Aguilar: In the preconquest period, rice was highly valued and perhaps considered the most esteemed cereal, but it was not a daily staple. Rice production was insufficient and did not allow year-round consumption: “even datus with many slaves ate root crops in certain seasons” (Scott 1994, 291)

DIVERSIFY.  I have no doubt that If there were kamote and corn aplenty and cheap in palengkes and groceries, we could all get into the rhythm of seasons: rice when it’s plentiful and cheap, and on special occasions, of course … and kamote, corn, and other carbs like saging na saba and cassava (kamoteng kahoy) during rice shortages, or alternately with rice, like every other meal, or every other day…

I imagine that before long we’d find them to be just as filling and satisfying, whether with ulam or as kakanins. The internet already offers all sorts of new interesting ways of cooking preparing kamote, cassava, corn, and saba for meals and as snacks.

It would be like coming full circle, an open one that levels up, as in a spiral. Evolution as revolution. If we all can get our act together. #

 

Politics, economics, rice

ORLANDO RONCESVALLES

The production, consumption, and importation of food (rice or grains) have posed contentious as well as analytically difficult issues even when economics was still in its infancy. In the early 1800s, David Ricardo came up with the idea of comparative advantage to explain why countries trade. On its face, it presented a paradox because comparative advantage suggested that a poor country (one endowed with limited technology) should export a good such as rice even if it didn’t have an absolute advantage in its production (it just needed to have a comparative advantage). Ricardo was also not one to advocate self-sufficiency as he was pretty much a proponent of free international trade. Today’s debate on the merits of rice tariffication presents conundrums and even unanswered questions, though the latter have perhaps more to do with politics than economics.

But even earlier, when economics was not yet a social science, kings and despots already knew that to survive insurrections, they made sure that the price of bread or grain (or any food staple) was affordable to the masses. The Roman poet (Juvenal) considered on or around 100 AD that political stability required whoever was in power to provide bread, as well as circuses! Forget the Romans. The Bible has its share of stories where kings had the burden of protecting their subjects from suffering in times of famine. Closer to home here in the Philippines, when the price of rice spiked in 2018 and became part of an inflation scare, there was a fair amount of wrangling on what to do.

The conventional wisdom today in economics, particularly in the textbooks on international economics, hasn’t changed much in the last two hundred years. Free trade, because it is voluntary and anchored on the concept of comparative advantage, was (and still is) a good thing. And yet, here we are in today’s age of wondrous innovations dubbed as the “fourth” industrial revolution, fulminating at the specter of rice prices remaining high for the consumer but falling to penury-inducing levels for rice farmers. What has gone wrong?

Read on…

Rice cartel inside NFA alive and well

Dr. Dante Ang

Is NFA Administrator Jason Laureano Y. Aquino just naïve or part of the cabal?

For the past few weeks, Cabinet Secretary Leoncio “Jun” Evasco and Aquino were at loggerheads over the issue of rice importation specifically whether or not to extend the import permits that had expired on February 28, 2017 to March 31, 2017. The NFA Council and its Chairman Evasco were for the extension; Aquino was against it.

Read on…

The NFA mess
Rice is what we make of it by jemy gatdula
All rice by gary olivar
June 30, 2017 by lito banayo
What are Duterte’s men fighting over by federico pascual
Ditch rice policy, gov’t urged by foundation for economic freedom
GATT issues, Gut issues by corinne canlas
Mekong rice by frank lobrigo