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The situation for both crude and rice prices has taken a turn for
the worse.
Crude prices have scaled $122.73 per barrel for
the first time. There is no light at the end of the tunnel. Goldman
Sachs predicts oil prices will surge to $200 per barrel in what the
think tank calls a “super spike” in six to 24 months or by 2009
before they begin to stabilize as a result of extreme lifestyle
change to adjust to record prices. That means you can expect local
gasoline price climb to P100 per liter. Expect also traffic to ease
up. Every time the price of crude goes up, so does the price of
electricity. When electricity and gas prices go up, the price of
everything goes up. It’s a never-ending vicious chain. Inflation
will burn purchasing power. Loss of purchasing power means poverty.
At the same time, the Philippines has been
buying rice in the world market. It finds no sellers. That should
cause panic. So we will have gas at P100 a liter and rice at not
less than P50 per kilo.
There has been a global run on rice. Everybody
is looking for rice and finds only little supply. Food riots have
erupted in a dozen countries. In the United States, big supermarket
chains have begun rationing rice. I never thought that in my
lifetime, I would see a run on rice in the world’s richest and
most powerful country.
The recent issue of BusinessWeek explains how
the rice crisis developed. It began as a scare. Major rice exporting
countries, India and Vietnam, saw prices of wheat, soybean and corn
skyrocketing. One of the world’s major wheat producers, Australia,
was devastated by a ten-year drought. India and Vietnam then decided
to restrict the export of rice, the cereal being half or a major
component of the consumer spending basket. You control the price of
rice (by providing ample supply), then you control half of the
consumer price index which measures inflation. The tactic, however,
backfired, according to BusinessWeek.
Instead of bringing down prices, the
restrictions brought prices up since they caused panic abroad. The
world price of rice rose prompting Indian and Vietnamese domestic
producers to raise their prices too. The higher prices triggered
even more panic resulting in more price escalation. The result is
that in just three months, the export price of rice doubled and
sellers withdrew from the market in anticipation of further price
increases.
Fundamentally too, hectarage planted to palay
has been declining in the Philippines and others parts of the world,
including China, the world’s largest consumer, and the US, which
shifted a fifth of its land devoted to corn to producing corn for
ethanol. Also, as incomes in once poor countries like China and
India rose, their consumption pattern shifted away from rice to meat
which means farms devoted to cereals were shifted to raising poultry
and piggery.
What to do then?
Government’s hands are tied, especially this
government which has had a political crisis even before the rice
crisis exploded. That leaves the private sector, the most dynamic
and nimble sector of the economy.
Raul Concepcion suggests helping the poorest of
the poor by helping manage the distribution by the government of
subsidized rice, starting in the Pasay area. The idea is to ensure
transparency and that little or no corruption will take place at the
expense of the poor.
For the long term, I think Big Business should
stop this business of building homes for the poor under the Gawad
Kalinga program. No use having a house if you don’t even have a
kilo of rice on the table. A poor family can go on without a roof
over its head but won’t last long without food to eat.
biznewsasia@gmail.com
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