Food for Thought on Food Crisis

What is causing the insufficient rice produce in the country? Should we blame the free trade disciples who have been saying “let the countries with the lowest cost structure produce the crops which will make it cheaper for people”? While this may have some truth, I believe we now see what happens when things are overdone.

It shows that even in the Philippines, we cannot be overly dependent on the importation of lower cost products because the situation can change; like what we see now on major categories like rice, wheat, sugar, beef and other commodities, prices of which have gone up to record levels. There are cases when orders of these products are not being served as the exporting countries would prioritize their local needs.

We see the interplay of several factors, such as the phenomenal increase in oil prices and the tragic combined effects of limiting supply and growing demand. We all observed the increasing purchasing power of two of the world’s largest markets; that of China and India has raised the demand to all-time-high levels. Meanwhile, the continuing increases in oil prices have encouraged several countries to search for oil substitutes. Countries have started to allocate land to plant crops for biofuel, while oil producing nations have also started efforts to buy farms all over the world, especially in Asia in a bid to assure themselves of food supply (or perhaps to encourage the use of land for food rather than for oil substitutes). How serious will this food crisis go? These things will be corrected in time; but as commodity prices are also exaggerated with many hedge funds buying commodities, prices of commodities will stay high.

Moreover, uneven playing fields or plain market forces in source countries may lead to undue comparative advantage. Typical example would be the exportation by the US to the Philippines of dark chicken meat, which to them is given very low value since the American consumer would prefer white meat parts. This reality almost killed the local chicken industry in the Philippines.

As I was driving down from Los Angeles to San Francisco (and the last time I did this was five years ago), I was amazed to see areas near Santa Barbara and noticed a remarkable change. For over 100 miles on both sides of the road, huge tracks of land were converted to vineyards and planted with other fruit crops. I am sure lots of investments were made. This reminded me of the potential we have in the Philippines, especially in Mindanao. You can imagine Mindanao and the huge tracks of land we also have there. With an almost perfect weather, Mindanao has the tremendous potential of becoming the food basket of the Philippines.

The real situation lies in the Philippines considering we used to be one of the main exporters of rice and good potential in fruit and root crops. We actually trained people from China and Thailand in terms of rice production. As a goal, we must bring up rice production in the Philippines and eventually become self sufficient. How can this be done? What opportunities do this present for entrepreneurs? Likewise, the risks of the weather have been a deterrent to many entrepreneurs venturing into agriculture.

I have asked active Go Negosyo mentors like former Agriculture Secretary and 2007 Entrepreneur of the Year Senen Bacani, together with Arsenio Barcelona and Henry Lim Bon Liong, to share their thoughts on the notion of the Philippines being self-sufficient with rice in the next five years and on what opportunities it presents to entrepreneurs. These are their thoughts and recommendations on the country’s agriculture and food security.


Realistically, it may take two to three years for our country to be self-sufficient in rice as we need to build/rehab and restore some of our irrigation facilities as well as generate enough certified and hybrid seeds. Programs are in place and what we need is a more effective implementation. Previously, prior to the world crisis, there seems to be ambivalence on the national policy on becoming self-sufficient in rice, whether it takes 100 percent or just about 90 percent of the requirement. Under normal times, it makes economic sense to import rice as other countries like Vietnam and Thailand can produce rice at 200-300 US dollars per ton vs. the Philippines’ 400 US dollars per ton. Plus, having self sufficiency also runs the risk of having surpluses at certain times which drives down farmgate prices. But, we see the reality now that when the crisis becomes a global scale, exporting countries will first prioritize their local requirements before serving buying countries like the Philippines. Thus it pays to ensure preparing for our full requirement. Moreover, there is the phenomenon of population growth that must require agriculture planners to prepare for the requirement of the growing population.

On the risk of excess production, assuming we have reached the point of self-sufficiency, there must be a support fund that will allow buying off buffer stocks to keep a good price for farmers, for future use and for possible exports (if price and cost warrant). Export price of course would depend not only on global price but also on the forex rates.

On foreign companies wanting to buy farmlands, our constitution prohibits ownership but investments in JV operations and long term leasing are always possible and would oftentimes make more sense for foreign investors.

Negosyo opportunities would be in the commercial production of organic fertilizers, which right now has remained mostly backyard operations. There are also opportunities for certified and hybrid seeds supply and rice-based value added products.

From ARSENIO BARCELONA of Harbest Agribusiness Corporation

The spiraling prices of basic commodities such as rice and corn have brought up concerns on the soundness of our agricultural policies regarding the efficiency of our development program and their sustainability in the municipal level. Many reasons were given. The doubling of chemical fertilizer costs, high cost of transporting the farm produce to market or to processors, the pressure on labor cost and the increased cost in the procurement of imported rice and corn brought about by the steep increase in Petroleum price per barrel. Many technocrats are also questioning the soundness of Bush’s national policy of producing ethanol from corn which placed a lot of pressure on corn price, with fuel competing with feed for cattle. The queuing up of Metro Manila’s “poor” before the NFA rice rolling stores seemed to show the reality of a rice shortage. Or is it a “price” shortage for cheaper rice?

With this scenario, our attention is again focused on the rice and corn situation of the country’s agricultural output. However, there is sector that ought to have the attention of our local executives to address urgently and immediately the supply of affordable food for the daily needs of Filipinos. This is the vegetables sector. The often neglected yet highly effective means to provide an affordable substitute for imported food that will provide the basic nutritional requirement of most Filipinos with rice.

As an immediate action to address the high prices of rice and corn, as well as food items in the market, it is suggested that LGUs take the lead in implementing a serious vegetable production in the barangay level, with logistical support for basic inputs and irrigation system that can provide the necessary element for success in its vegetable self-sufficiency program.

From HENRY LIM BON LIONG and JOH DUNGCA of SL Agritech Corp.:

The government will succeed in its rice self-sufficiency program which was started by President Gloria Macapagal Arroyo in 2001, if we will go into hybrid rice production in a more massive scale. The average yield of the inbred rice variety is only three tons per hectare whereas; hybrid rice variety can yield more than 10 tons per hectare. At present, only 200,000 hectares out of the 3.9 million hectares of the country’s total rice farms are planted with hybrid rice. If we can increase the hectares planted with hybrid rice by 800,000 hectares, this will produce an additional 3.2 million metric tons of palay or two million metric tons of rice (800,000 hectares x 4 tons per hectare = 3.2 million metric tons of palay). With this production, we will be able to attain self-sufficiency in rice and would not need to import a single grain.

There will be more recommendations and thoughts on the country’s agriculture and food security from Go Negosyo mentors and entrepreneurs next week.