"There is cause for worry."
"There is cause for worry."
Last Monday, we wrote about the negative economic impact of the CoViD 19 epidemic. We made comments particularly on tourism, which is of course easy to see. And we worried about food security, particularly on rice, which is the country’s staple food.
Early into DA Secretary William Dar’s appointment, he was confronted with the African Swine Fever infecting livestock in Rizal and Bulacan. Quick action prevented the spread of the hog disease, but of late, ASF has begun affecting piggeries in Davao del Sur and elsewhere in Southern Mindanao. That is worrisome.
In Hunan province, the H5N1 disease has wreaked havoc on a big broiler farm, and hopefully effective quarantine actions could prevent its spread. Otherwise, Asia will have to worry about bird flu, the negative impact on food production being incalculable.
But we are particularly worried about rice, whose impact on overall inflation is quite huge. Notice how in 2018, rice prices drove inflation to highs of 5 percent and more. In 2014, we also experienced high prices for the staple. In 2009, there was a world rice price crisis which made the Philippines the world’s largest rice importer at prices exceeding $1,000 per ton, and non rice-producing regions such as NCR experiencing long queues for the staple. Similarly in 1995, people were stopping rice delivery trucks on the streets, demanding their share because stores had run out of the staple.
As immediate response early last year, Congress passed the Rice Tariffication Law at a time when the national grains agency had low inventories. The law practically neutered the NFA and opened up rice importation to the private sector, sans quantitative controls. The private sector responded bybimporting unprecedentedly huge volumes, which USDA estimated at 3 million tons.
This resulted in the depression of palay-buying prices, leaving most of the country’s rice farmers impoverished. The NFA could only buy so much, even as it upped its prices by orders of the economic managers. How much could the castrated agency do with a P7 billion budget for palay purchases, and even if increased belatedly to P10 billion, the same could only buy a little over 500 thousand tons, equivalent to 6 million bags when milled into rice. That is equivalent to nine days of the country’s overall requirement, Philippine per capita consumption being among the highest in the world.
But now, worry about the externalities.
China’s major rice-producing provinces are Heilongjiang in the north, Hunan, Jiangxi, Hubei (!), Jiangsu, Anhui, Sichuan, Guangdong and Guangxi. Look at the map and realize that most of these provinces are close to Hubei. Together, these central China provinces produce 140 million tons out of China’s total production of 208 million tons.
With CoViD 19, would you expect farmers to plant their paddy fields well enough considering the threat to their health? Hubei province alone, where the virus began, produces 20 million metric tons, equivalent to 10 percent of China’s total production, and equivalent to the Philippines’ total rice consumption needs.
Thailand is limiting its exports, preferring to export only the high-quality and high-priced jasmine. India is cutting its exports of rice, preferring to export more of its high-priced basmati, with its farmers likewise shifting from locally consumed lower varieties to export-demanded basmati.
Many Vietnamese paddy fields have been converted to other crops over the past ten years because of stagnant prices for their staple export.
With the depression of palay farm-gate prices owing to the over-importation of the staple by the private sector last year, it is likely that many of our own palay farmers switched to other crops. By how much, only the DA knows at this point. Add to that the impact of strong typhoons which devastated the Mindoros and Panay, major rice-producing provinces. That may have delayed planting.
With demand being inelastic, the 3 million tons in the hands of the private sector should be just enough for the market until the beginning of the lean months, if not earlier sold out.
Now look at the outlook for the world market.
On top of CoVid 19’s impact on Chinese rice production, on top of India and Thailand’s self-imposed constriction of their exports of low and medium-quality rice, now comes locusts.
There is a major, major swarm of desert locusts travelling from Kenya, Ethiopia and other Horn of Africa nations to India and Pakistan. India alone is suffering its worst hit from locust infestation in the last 60 years. And India and Pakistan are among the world’s biggest rice exporting countries, along with Thailand and Vietnam.
The International Grains Council is looking at high world prices. Even the UN Secretary-General, Antonio Guterres, noted that “today, locust swarms are as big as major cities and it is getting worse by the day.”
Hopefully, those locust swarms will not migrate to China, and hope that the mountains of Tibet and Xingjiang will prevent them from invading China.
Our current secretary of agriculture, having worked as head of ICRISAT, which specializes in the semi-arid countries now affected by the locusts, knows exactly how devastating these insects can be.
There is cause for worry. Once again, our staple food will hound our day-to-day economics in 2020.