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As it
inevitably happens with every new “crisis,” suddenly
every pundit (including me) and politician is now an
agricultural authority, with rice being the extra
special area of expertise.
I
suppose it is only natural since obviously, rice has
been part of the Philippine culture for a couple of
thousand years, if the Banaue terraces are any
indication.
Personally, I wish there was a “beer crisis” since I
have invested nearly four decades of honing my skills in
that discipline. Well, actually, there is a beer crisis
that no one is talking about at all. Last night my local
store started selling San Mig Light at P24 from the
previous P19-plus. Beer prices around the world have
jumped recently, as much as 50 percent in some major
cities. The price of a main ingredient of beer, hops,
has risen from $3 to $8 per pound to between $8 and $20
per pound. What a disaster.
However,
there is always a silver lining to every dark cloud.
Beer in
the Philippines retails for about 50 US cents a bottle,
if you drink cheap like I do. Compare that with Iceland
where beer goes for over $9 a bottle. Closer to home,
beer prices in the region look like this: Singapore,$6;
Malaysia, $7; Thailand, $1.50, and Hong Kong, $5. Even
one of our major rice suppliers,
Vietnam,
is more expensive at $1. Too bad San Miguel already has
a presence in Vietnam. Otherwise, we just might be able
to trade Philippine beer for Vietnamese rice.
The
British Broadcasting Corp. (BBC) mentioned the
Philippines as a place, along with Bangladesh, where the
jump in rice prices will “hit hard.” I think the BBC is
exaggerating about the Philippines, and the comparison
with Bangladesh is unfair. Beer sells there for $2.07 a
bottle.
In fact,
I cannot find one country in the world where beer is
cheaper than in the Philippines. But I promise you, I
will keep trying and tasting.
However,
I have no intentions of sharing any more of my brilliant
analysis about beer until the beer crisis hits the front
page of the newspapers and the Senate starts holding
hearings on the rise in beer prices.
So back
to my newfound area of profound wisdom: rice.
I
researched rice prices, to keep up with the other
experts, and I discovered some interesting facts. The
world price of rice has been very volatile over decades
with many yearly swings of nearly 100 percent between
the high and low annual wholesale prices. Yet, at the
same time, retail prices of rice globally are very
constant. What that says is that consumer rice prices
are very heavily controlled by national governments.
It is
not just the “poor” and Third-World countries that
influence rice price and rice production. Twenty years
ago, “Japan was providing a $2,200-per-metric-ton
subsidy to Japanese domestic producers. This subsidy was
as much as 10 times the world price” (Unites States
House of Representatives, 1986). Even now, “The most
recent information available indicates that the Japanese
government directly subsidizes rice production by as
much as $1.82 billion. On a per-hectare of production
basis, Japan’s subsidy is enormous, over 12 times that
of the
United States
and European Union subsidies combined.” (Fukuda, Dyck, &
Stout, 2003).
Now here
is something interesting about the Japanese rice
industry. Total production of rice in
Japan
is now virtually the same as in 1961. You would think
that with incredibly large government subsidies for rice
farmers, production would be significantly greater than
of 45 years ago. Granted, there is a limit to the arable
and rice-producing land available in Japan. However, the
amount of land in Japan under rice cultivation has
decreased in 45 years from over 3 million hectares to
slightly over 1.6 million hectares. Per-hectare yield
has risen by 30 percent.
I
certainly would not want to downplay the fact that
rice-consuming nations are facing a “crisis.” They might
take away my membership in the “Rice Crisis Experts
Club” if I did that. However, a look at the world price
of rice over the last five years shows something
revealing.
In
January 2003 rice traded on the Chicago Board of Trade
at 4 US cents per hundredweight. By mid-2004, the price
went up to 12 cents or almost tripled in 18 months. Last
year rice traded at 10 cents and is now at 20.5 cents
fort a doubling in price since January 2007. Why is it
that 1) there was little public and private concern with
that first tripling of price, and 2) why did not
consumers see the retail price of rice also triple?
Could it be possible that government intervention in the
free-market price of rice simply delayed the inevitable
price rise and made it larger and more painful now?
One
other bright spot that ought to be taken into account
for our policy planners is that the rice-futures
contract for delivery in November 2009 is trading now at
16 cents, so in a few months the price “crisis” may be
over.
I hope
we can say the same for beer prices.
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