“BBM can scare the daylights out of the rapacious rice merchants”
Two major crises are sweeping through the Philippines right now—a food crisis and an energy crisis. Both cannot be solved—either short term or long term.
The saving grace is that incoming President Ferdinand “Bongbong” Marcos Jr. is acutely aware of the problems.
BBM’s solution to the food crisis is temporary. He wants to bring down the retail price of rice to P20 per kilo. That’s half of current rice prices in Manila markets. He will get a P20 per kilo rice three ways—by talking to the middlemen (who are often the main problem with high rice prices, especially in urban areas), he will bring in more rice importations, and he will help the farmers to enable them to produce more.
So expect a P20 rice per kilo right after BBM is inaugurated on June 30 this year. The most popular president in Philippine history has a shock and awe effect. With 31.6 million votes and 60 of every 100 voters voting for him last May 9, BBM can scare the daylights out of the rapacious rice merchants.
BBM’s two other solutions are a bit iffy. Rice importations? Well, the major rice producers and exporters are suddenly hoarding stocks. Every grain supplier now is in hoarding mood.
In 2021, the Philippines imported $15.7 billion worth of agricultural goods, up 25 percent. A fifth of the imports, worth $3.14 billion, had been cereals, our No. 1 food import, and up 23 percent from 2020. Third biggest food import was meat, $1.69 billion, up 78 percent from 2020. Your rice and your adobo are imported goods.
The Philippines exported only $6.78 billion in agricultural goods, up 9.4 percent. Exports were mostly fruits and nuts (not the human variety).
Assist the farmers? Well, it makes for a nice post-campaign promise but it is not seen as practical.
Firstly, the average Filipino farmer is incompetent. He produces only 4 tons, or probably less, of palay on the average per hectare. A Vietnamese farmer makes 5.69 per hectare or 42 percent more. Secondly, the Filipino farmer is aging, near 60. And he doesn’t want to pass on his calling to his boys, who most probably are now working in some construction site or airport in the Middle East.
Thirdly, our so-called pro-poor economists think of 110 million consumers vs. 3 million farmers. Give the 110 million consumers the cheap rice they want. And damn the farmers, who are a small minority. That is what I call perverse democracy.
In 2021, Russia (39 million tons) and Ukraine (17 million tons) were the world’s first and fifth biggest exporters of wheat, with combined share of 28 percent of the world market. Ukraine wheat exports were blocked by the war. Russian wheat exports were stopped by sanctions. The effect is higher grain prices, including rice prices.
Year-on-year, rice price is up 29 percent; wheat up 55 percent, palm oil up 56 percent, orange juice up 50 percent, and milk up 42 percent,
On the energy front, meanwhile, Oilprice.com reported this week that oil prices rose on Wednesday as China’s financial hub, Shanghai, reopened after two months of COVID-19 lockdowns.
The benchmark West Texas Intermediate crude traded at $114.70 per barrel, up almost $4.50 per barrel during the week. Brent crude traded at $115.80, up more than $2 per barrel.
Year-on-year, crude oil is up 64 percent, Brent crude up 59 percent, gasoline up 82 percent, natural gas up 188 percent, and coal up 246 percent. More than 60 percent of Philippine electricity production comes from coal. This month, I got my home electricity bill—it’s double the usual amount.
The European Union leaders agreed May 1 to cut Russian crude oil imports by as much as 90 percent by the end of the year. The agreement is in principle but it is enough to spike oil prices worldwide. An embargo on Russia oil means less supply to the world.
The problem is Europe has very few options where to get the supplies in lieu of Russian oil. There is little surplus oil, right now, if any. The Saudis are unwilling to boost production to cover deficits.
Mineral fuels, meaning oil, were the Philippines’ No. 2 import in 2021, $14.62 billion, 14.6 percent of total importations, and up 91.5 percent from 2020.
On May 26, the day after his proclamation, BBM gave intimations of how he would approach the food and energy problems.
First, he chose the right economic team. He put veteran economists, by training and practice, at the Department of Finance (Ben Diokno), at Economic Planning or NEDA (Arsi Balisacan), at the Sentral Bank (Felipe Medalla), and Trade and Industry (Fred Pascual, who is a chemist).
In case some people will argue with him with some abstruse legalese about food and energy, BBM has named lawyers as his executive secretary (Vic Rodriguez), education chief (Sara Duterte), Interior and Local Government head (BenHur Abalos), Labor secretary (Benny Laguesma), communications chief (Trixie Angeles), and justice secretary, of course (Boying Remulla).
None so far have been appointed with some working expertise in rice farming or producing or trading in oil.
BBM will do the talking and action. He will talk with oil producers. He will negotiate with the oil VIPs of the Organization of Petroleum Exporting Countries led by Saudi Arabia –and Russia.
BBM won’t reduce the taxes on retail prices of refined petroleum and gasoline products. He needs the money—maybe as subsidy to bus and jeepney and banca operators and drivers.
The government gets more from taxes than what the oil companies get from the retail price of their gasoline and other oil products.
The conclusion then: your rice, pan de sal and pan prices will remain elevated (not in baking terms). As do the prices of your gasoline, diesel, LPG, and electricity.
In the meantime, BBM was elected by over 31 million Filipinos.
You know the number of jobless Filipinos? Also 31 million.