Rising oil prices seen to keep rice prices high in next two years

from ABS CBN News

By ISAGANI DE CASTRO JR.

Rising oil prices will keep world rice prices high in the next two years, and analysts expect only slight reduction in local rice prices as imports boost the country’s reserves.

Agriculture experts told abs-cbnNEWS.com/Newsbreak that high crude oil prices, which has reached $135 per barrel, means higher production costs for farmers.

"The culprit here is fuel, petroleum. When you start to prepare the land, you use the tractor, you use fuel. When you start to plant, the fertilizer you use, the pesticides are petroleum-based. When you harvest, the combine, all the machinery use fuel. When you transport it, you use fuel. When you mill the rice, you use fuel. And now, it’s $135 per barrel," Jesus Tanchanco, former National Food Authority Administrator (NFA) during the Marcos years, said. "The solution is to find alternative sources of fuel."

In a separate interview, Dr. Francisco Malabanan, chief science research specialist of PhilRice said he supports the view of international rice experts that the price of rice "will not soften in the next two to three years."

Dr. Rolando Dy, executive director of the Center for Food and Agribusiness of the University of Asia and the Pacific, said there may be "some correction" in world rice prices "but within a single digit only".

At the retail level, Dy said this may mean a correction in commercial rice prices from about P35 per kilo to about P33 per kilo. "If it corrects even slightly, I’d be happy," he told abs-cbnNEWS.com/Newsbreak.

(See commercial rice prices here: http://www.bas.gov.ph/bms.php)

All of them agreed that rice prices will not go down to previous levels.

"I see prices moderating, but not to 2006 levels," Dy said.

He said the policy of the next US president on grains will also have an impact on rice prices.

No rice shortage
Tanchanco said the Arroyo government is taking the right steps in boosting rice reserves by negotiating with different governments.

During the world rice crisis in the early 1970s, Tanchanco said the Marcos government tried to buy rice, but none was available in the open market. Thus, the government resorted to bilateral negotiations to get access to national reserves.

"GMA is now buying rice at any price. I experienced that in 1973. Marcos asked me to buy rice anywhere, any place. Any price, any quantity. I signed more than 1 million tons of rice contracts, only one grain arrived. There was no supply. The next thing I did was government-to-government," Tanchanco said.

The Arroyo government has taken the same step by negotiating with Thailand, Japan, and the US for their rice surpluses.

The agriculture experts had the same view that there is no serious shortage of rice in the country, and that it’s more of a price crisis.

"There’s really no shortage. It’s not a very serious shortage of rice," Tanchanco said.

Dy described the problem as "an artificial shortage" caused by the steps taken by of rice-exporting countries to ensure their own rice reserves.

Causes
Both experts also agreed that the main causes of the Philippines’s poor rice production are.

- Low priority to agriculture;

- Lack of irrigation;

- Failure to finance the Agriculture and Fisheries Modernization Act (AFMA;

- Low budget to agricultural research and development.

Tanchanco said he has been asked by agriculture secretaries for his advice on how to solve low rice production and he has given them the same suggestion: "I have three advice to you: number one, water; number two, water; number three, water."

"Because without water, we will have no agriculture. As long as you have water, farmers will plant. But if you have no water, even if you have a big budget for agriculture, even if you use hybrid rice or other technology, they won’t have an impact," he said.

The need to attain rice self-sufficiency was the reason why the Marcos government built so many dams, which irrigated rice fields.

He also lamented that so many irrigated rice lands in Laguna and Batangas had been converted to non-agricultural uses.

Tanchanco said Thailand and Vietnam are able to produce more rice than the Philippines since they have a bigger area planted to rice. They also have big river systems that irrigate their principal rice producing provinces.

In his paper, The Roots of the Global Food Crisis, Dy said only 68% of the Philippines’ rice area is irrigated. In contrast, it’s 93% in China; 80% in Vietnam; 75% in Indonesia.

Citing data from the Department of Agriculture, Dy said that instead of the P20 billion annual budget that was supposed to go to the AFMA, the AFMA budget has been declining since 2000.

In 2000, AFMA got a P16 billion budget, but this fell to P11 billion in 2006.

Poverty
Tanchanco and Dy also disagreed with the view that high population growth is a big factor in the rice crisis.

"The so-called rice crisis is not due to population growth but due to under-investment in agriculture and infrastructure, poor record in eliminating poverty, and poor infrastructure quality," Dy said. "The so-called rice crisis is an income crisis."

He said the failure to solve poverty means Filipinos have no choice but to buy the cheapest staple, which is rice. If poverty had been eliminated, Dy said Filipinos would not be consuming so much rice and would be eating more meat and bread.

For his part, Tanchanco said the Philippines can feed a much bigger population since it has enough land, technology and know-how to "become self-sufficient in food."

Asked to comment on the Arroyo government’s P43 billion, Tanchanco it appears to be more of a short-term "palliative."