Debt and diabetes: The cost of Marcos’

P20/kilo rice aspiration

JUL 2, 2022 2:00 PM PHT
Ralf Rivas

From a debt drag to a surge in diabetes cases, the cost is just too high to bring rice
down to just P20 per kilo
MANILA, Philippines – President Ferdinand Marcos Jr. wants to bring rice prices
down to just P20 per kilo.
With immense funding, he can, especially now that he has assumed the position
of agriculture chief. But this comes at a cost, which would sideline other agricultural
products and have immense implications for public health.
Here’s some of the reasons why his low target price is terrible economics.
The Philippines’ natural disadvantage
Neighboring Southeast Asian countries, like Vietnam and Thailand, have something
that the Philippines doesn’t have: land suitable for growing rice.
In a discussion paper published by the Food and Agriculture Organization,
economist David Dawe said that countries that are able to export are situated on the
Southeast Asian “mainland,” while the Philippines, as well as fellow rice importers
Malaysia and Indonesia, are islands or peninsulas.
“The answer is that the countries on the mainland have dominant river deltas that
provide ample water and flat land (important for easier control of that water). Such an
environment is particularly suitable for cultivating rice, which, unlike wheat and
maize, has a semi-aquatic ancestry and is thus particularly sensitive to water
shortages,” Dawe said.

Dawe added that these river systems also allow for lower-cost transportation of rice
over medium and long distances and effectively facilitate exports.
“Thus, in terms of achieving rice self-sufficiency, island countries have a natural
disadvantage. Less of their land is suited to growing rice and, as a result, they
cannot compete at the margin with the mainland rice exporters,” he said.
Land for rice harvest in the Philippines is relatively small at 4.8 million hectares,
according to data from the Department of Agriculture.
Thailand and Vietnam have around 10.5 million hectares and 7.5 million hectares for
rice production, respectively.
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[PODCAST] Beyond the Stories: P20 kada kilo na bigas, posible ba sa ilalim ni
Marcos?
Just how low are prices in Thailand and Vietnam?
Data from the Philippines Rice Research Institute (PhilRice) said that farmers in
Nueva Ecija, the Philippines’ rice granary, is able to produce a kilo of rice for P12.41.
Vietnam can produce the same amount of rice for just P6.53, and Thailand at P8.85.
A typical Filipino rice farmer will usually sell rice at a farmgate price of around P17 to
P19 per kilo. Transport costs and other expenses to take the rice to the palengkes or
supermarkets would double the price of rice to P34 to P38 per kilo.
The chart below by PhilRice shows the breakdown of expenses per kilo of rice
produced:

Meanwhile, rice from Vietnam and Thailand can cost around just P23 to P27, prior to
slapping of tariffs upon entry to the Philippines.
Data from the Philippine Statistics Authority (PSA) showed that well-milled rice retails
at around P37 to P41 per kilo.
Climate change crisis
Other than competition, the Philippines also faces a climate change crisis.
Based on Fitch’s Climate Change Physical Risk Exposure Heatmap rankings, the
Philippines ranked fourth in terms of risks arising from floods and storms. The
Philippines trailed Mozambique, Vietnam, and Bangladesh.
Climate change caused P506.1 billion (around $10 billion) in losses and damage to
the Philippines over the past decade, according to the Department of Finance.
Meanwhile, rapid urbanization also poses a challenge to the rice sector. PhilRice
noted that it led 45.3% of the population to move in urban areas, effectively resulting
in changes in the demand pattern for rice.
What can Marcos do?
With geography, climate change, and other global market forces in play, what can
Marcos do to bring down prices?
More imports? According to Geny Lapina, a faculty member of the Department of
Agricultural and Applied Economics of the University of the Philippines-Los Baños,
importing more rice won’t bring rice prices all the way down to P20 per kilo.
Lapina explained that imported rice would arrive in Philippine ports at around P24
per kilo. Add in the tariffs and other costs, and it would reach stores at around P33
per kilo.
Removing the tariffs would also place farmers at a disadvantage, as the Rice
Competitiveness Enhancement Fund or RCEF – which supports farmers’ programs –
rely on tariffs.
“If you remove the tariff, where will we get the funds for RCEF? So you’re really
balancing these things…. Our reality is that [the P20 per kilo] is not going to happen.
We can dream it,” Lapina said.
Lapina added that the Philippines faces more headwinds now, as the peso weakens
to a 16-year low against the US dollar. This means higher import costs.
Subsidies for farmers? If Marcos decides to lower prices by buying rice from
farmers at higher rates and then selling it at a lower price, this would lead to a fiscal
problem.
Cenon Elca, faculty of UPLB’s Department of Agricultural and Applied Economics,
said that this could cost the government as much as P200 billion.
“If you buy at P20 to support farmers and sell at P10 at the farmgate, the net effect is
a capital outlay of around P200 billion just to support that P20 retail price of rice,”
Elca said.
Elca added that this amount is over 10 times RCEP’s P18-billion fund.
“If you pour in money, you can make it happen. But hearing from the statement of
Finance Secretary Benjamin Diokno, he favors fiscal discipline, as our debt-to-GDP
(gross domestic product) is now at 63%,” Lapina said. (READ: A Staple Problem?
History of rice crisis in the Philippines)
Policy, public health implications
As Marcos aims to bring rice prices down, this might mean that other crops and
agricultural products may be further sidelined.
Currently, rice has the biggest budgetary support at P15.5 billion, followed by
fisheries (P3 billion), high value crops (P1.6 billion), corn (P1.5 billion), livestock
(P1.1 billion), and organic agriculture (P665 million).
“You are channeling towards rice only. For agricultural development, that’s not the
direction we see in our research. The direction is diversification, that’s good for
biodiversity,” Lapina said.
“It’s very difficult to focus on rice alone even from a government investment
perspective; you don’t want to put all your eggs in one basket,” Lapina added.
Lapina and Elca also warned that lower rice prices would encourage Filipinos to
consume more rice.
“There are Filipinos now who are shifting away from rice and are concentrating more
on consuming protein and vegetables. But if they see rice prices go down, they might
go back to a cereal-based diet and that’s not good, it could imply higher incidence of
diabetes,” Elca said.
The chart below shows that Filipinos may consume as much as 15.88 million tons of
rice by 2030.

PSA data showed that deaths due to diabetes mellitus ranked fourth in 2020 at
37,265, after heart diseases (99,680), cancer (62,289), and cerebrovascular
diseases (59,736).
In the Philippines, 1 in 14 Filipino adults lives with diabetes, according to the
International Diabetes Foundation.
Experts said that the pandemic likely increased the chances of adults developing
diabetes due to reduced physical activity and obesity.
Rice road map
While the numbers would show that it would be impossible for Marcos to bring prices
down to his desired level, he can at least pick up on the gains of the past
administrations and follow the rice industry road map.
The roadmap details the 57 provinces that have the potential to produce rice at the
lowest production cost of P8 to P10 per kilo, considering the geographic location and
other challenges. (READ: Duterte’s agri chief to Marcos: Use PPP to build irrigation
systems, hike DA budget)
It also details which rice-producing areas cannot compete with imports, and farmers
would have to transition out of rice farming. – Rappler.com
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