ESSAY: If there’s no rice shortage, why is the price of rice abnormally high?

There is no rice shortage, and the country’s rice supply is adequate to last for 57 days, Department of Agriculture Secretary Arthur Yap said. If there’s no rice shortage, why is the price of rice abnormally high?

Global factors

According to Dr. Arsenio Balisacan of the University of the Philippines School of Economics and director of the Southeast Asian Regional Center for Graduate Studies and Research on Agriculture (SEARCA), the situation is not abnormal in the Philippines. It is global.

Balisacan said there is a growing affluence in developing countries. As a result of this, the people consumed more meat, which eventually pulled up the prices of wheat, corn, and other feedstock for animals. Consequently, farmers find these crops more profitable resulting in crops shift. Hence, areas planted to rice have decreased.

What’s more, only 7% or only 30 to 35 million metric tons of the world rice supply are traded in the market, said Dr. Leocadio Sebastian, executive director of PhilRice. This resulted in a tight supply in the world market which has an impact on the Philippines as it is a major rice importer.

According to Dr. Sergio Francisco, leader of the Impact, Policy, and Research Program of PhilRice, the world’s rice exporting countries trade their rice in the world market. Considering that supply is tight and it is a sellers’ market, the country that can pay a higher price gets the rice supply. Result: higher world rice price which is reflected in our retail market.

Likewise, growing demand for biofuels has resulted in crops shift. Farmers are getting more interested in planting crops for biofuel rather than for food, explained IRRI director general Robert Zeigler.

Local factors

According to the book, “Why does the Philippines import rice?”, Filipino farmers spend twice the cost of Vietnam and Thailand farmers in producing rice. Roughly about 10% of the increase in the expenses in rice production is due to high prices of inputs like fertilizers and fuel.

Moreover, Philippine traders face a high interest rate of 15% in borrowing from banks compared with the low 5% in Vietnam and Thailand , according to the book.

Land conversion, overpopulation

According to a PhilRice study,  from 2003-2007, 34,200 tons of rice were lost due to the conversion of an average of  9,000 hectares of farms for factories, subdivisions, and malls.

The problem is exacerbated by the Philippines’ burgeoning population. By the end of this year, the projected population of the country is 90.4 million.

Studies done by PhilRice show that rice production has been doing very well in recent years, only that it cannot keep up with the population growth. While there is no rice shortage, the Philippines should invest more on research on how to make rice farming more efficient and profitable for the Filipino farmers.#

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