Rice woes’ bigger picture
The problem in India is reminiscent of the recent onion crisis in the Philippines, where the cost hit P600 per kilo, making it more expensive than meat.
Text size
Share
Daily TribuneThe problem in India is reminiscent of the recent onion crisis in the Philippines, where the cost hit P600 per kilo, making it more expensive than meat.
Share
Global markets are intently watching the Philippines' moves on rice importation amid threats of a second wave of inflation shock, after the still prevalent impact of high oil prices that triggered a global crisis.
Since the Philippines is now the biggest importer of rice in the world, the price of the grain depends on the trading price with the Philippines.
The surging rice prices could be a warning to other major importers of the food staple as the fallout from India's export restriction continues to reverberate, according to the Food and Agriculture Organization, or FAO.
The United Nations food body warned that a perfect inflation storm may be brewing in Asia due to the shrinking rice supply.
Rice prices surged to their highest in almost 12 years in response to India's rice export ban and the adverse weather conditions that dented production and supplies of Asia's staple food.
A confluence of factors is stoking fears that a shortage of rice supplies could mark a return to a broad increase in the prices of other food commodities.
Conditions that are expected to keep food prices high are the extreme climate from global warming, the onset of El Niño for the first time in seven years, Russia's withdrawal from the Black Sea grain initiative, and protectionist food policies in the form of trade restrictions.
When the food price crisis first struck in 2010-2012, the Asian Development Bank estimated in 2011 a 10-percent rise in food prices for developing Asia, including the Philippines.
At that level of domestic food prices, some 64.4 million individuals in the region would fall into poverty at that $1.25-a-day poverty line. It would have meant a rise in the poverty rate from 27 to 29 percent.
At the moment, the price watchdogs believe that the steps taken by the government, including the price cap, will keep prices low until the harvest season later this month, when the supply is expected to stabilize.
Nations are realizing that they need to be prepared to ride out these disruptions, whether it's trade shocks or agricultural supply shocks.
Maybank economist Erica Tay listed a few countries in the region, such as Thailand, Vietnam, Myanmar and Cambodia, as net exporters, while the rest import their requirements.
Tokyo-based investment bank Nomura said Asia-Pacific economies are "highly exposed" to a global rise in food prices. However, its impact may not fully materialize in inflation figures until months later.
The delay results from price controls and subsidies, but it warned that such state interventions will likely also exacerbate global food price pressures.
Chief Presidential Legal Counsel Juan Ponce Enrile said President Ferdinand "Bongbong" Marcos Jr. is doing a tough balancing act to ensure that the interests of retailers and farmers are protected after the imposition of the price ceilings on the staple grain.
Economists said Marcos needs to focus on the low-income households that will undoubtedly be the hardest hit.
S&P Global chief agricultural economist and director of research Paul Hughes said poor households tend to spend a larger percentage of their income on food.
"When prices go up, they have no choice but to cut back on spending elsewhere if possible," Hughes said.
Foul weather is another culprit in the inflation scare. India faces a tomato crisis as prices have skyrocketed more than 300 percent after flooding in major tomato-producing states like Andhra Pradesh, Maharashtra and Karnataka.
The problem in India is reminiscent of the recent onion crisis in the Philippines, where the cost hit P600 per kilo, making it more expensive than meat.
Through a concerted government effort to probe the situation, since the root bulb had a decent harvest, it was found that a cartel had been manipulating the market to create an artificial shortage and justify importation.
Now, it is the same modus operandi in the rice industry, as shown by the vast grain stocks in many Bulacan warehouses, which were not confiscated after the raids by a team led by Speaker Martin Romualdez.
Rice is considered a political commodity since 110 million Filipinos or more consume it daily, making the government's resolute act to head off a crisis imperative.
