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RICE is the new gold, not gold itself, not oil.
It’s rice. True the price of gold rose to $1,000 an ounce in
March, up 18 percent in three months. The price of oil has also
climbed to almost $120 per barrel as of yesterday, an increase of 70
percent year on year. But their price increases cannot match the
jump in the price of rice. Thai rice for export has doubled in price
in less than four months this year. A 100 percent increase in four
months is equivalent to 300 percent surge on an annual basis.
That’s a terrific increase. Not even the stock market will give
you that kind of gains in so short a time, unless of course you
manipulate the bourse.
Investors and banks, burned by
the subprime mortgage crisis, are rushing to buy grain futures. Wall
Street money is being plowed into American wheat as foreign buyers
stockpile on the commodity following a panic that began last
December and which has easily spread worldwide.
You know who are these foreign
buyers? Well, the Philippines is one of them. Buy at any price, is
Manila’s mandate. The country is joined by Japan and South Korea,
both eminently wealthy. It’s like competing with guys who drive a
Ferrari and all you have is a rundown jeepney.
The era of cheap food is over.
The Washington Post says prices of wheat have begun to come down as
farmers rush to plant more wheat. A price decline of 30 percent is
expected in the coming months. However, that still shows a 45
percent increase in price over last year.
There is money in food. It used
to be that margins you could get from food were between five and 15
percent. Ask San Miguel. Ask JG Summit. Ask Jollibee. Ask McDo. No
more. Profits on food exceed the cost of money, the cost of
inflation, the opportunity cost of all other business alternatives.
So invest in food.
I suggest some entrepreneur
invest in massive rice production. He can organize the farmers into
a cooperative and consolidate their land. He can involve the New
People’s Army to guard the farmlands from poachers and, yes,
corrupt government people. The NPA can stick the gun into the heads
of corrupt NIA personnel and force them to turn on irrigation pumps
and dikes without their hands being greased by bribe money. The
entrepreneur can borrow cheap money from DBP, the Land Bank, and
Coconut Bank which loses money by billions in corrupt loan deals.
Last time I heard about Cocobank, the government infused P20 billion
in fresh equity. In less than one year, the P20 billion was gone.
Now, Cocobank is again asking for equity money. Also P20 billion.
I suggest Cocobank use that money
to finance the production loan of rice farmers. At least if the
money goes down the drain, it will be money well spent. In the name
of food. In the name of poverty alleviation.
I also suggest that all the 24
senators and all the 236 congressmen pool their pork barrel money
and invest in rice production. That pork, about P20 billion, is
enough to rehabilitate the irrigation systems of about 250,000
hectares—half of some 500,000 hectares whose irrigation system has
become decrepit and in urgent need of rehab. Did you know that the
original concept of pork barrel was about foodO?
The senators and congressmen
should be given their usual kickback on their pork barrel—between
20 and 50 percent or P5 billion to P10 billion on their P20 billion.
That can be covered since rice prices will climb to $1,500 per ton
this year. I estimate local cost to produce a ton of rice is about
$500, if not less. That is assuming cost per hectare of P45,000
divided by yield per hectare of 3.77 tons or P11,936 or $284 per
ton. You sell it at $1,500, you make a $1,000 per ton
profit—enough to give the farmer his due reward and the senators
and congressmen their commissions. How about it, Congress?
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