Page last updated at 10:36 GMT, Friday, 11 April 2008 11:36 UK

Hoarders blamed for Philippine rice crisis

By Jonathan Head
BBC News, Manila

As global prices for rice surge to ever higher levels, the world's biggest importer, the Philippines, shows all the signs of being gripped by a rice crisis.

Jonathan Head joins a raid on a rice warehouse

Huge queues form wherever government stocks are being sold at subsidised prices.

The government has been scouring the international markets for new supplies to replenish its stocks, paying record prices.

Rice dominates the newspaper headlines every day, and seems to be consuming the government's energy.

But this crisis is not all it seems. "There's no shortage," Agriculture Secretary Arthur Yap told me. "The problem is not with supplies, but with price."

"And when you consider that 80% of our population spends 60% of their income on food, and 40% of that is on rice, it is very serious."

Mounting concern

The Philippines has always had to import rice. Unlike neighbours Thailand and Vietnam, which have turned themselves into the world's two biggest rice exporters, successive governments in the Philippines have failed to invest in the agricultural sector.

Last year the economy grew at an impressive 7.5%, leaving Thailand, with just 4% growth, in the slow lane. But most of that growth came from the services sector, like the booming call-centre business.

None of this mattered while food prices were low. But once they started rising, people began reacting, in ways which have compounded the problem for the Philippines.

Buying on the international market became harder. Traders in countries like Thailand sell rice on forward contracts, but with prices moving so fast they have found it difficult to determine the right price - and they now have huge numbers of anxious buyers to choose from.

Nonetheless the Philippine government did move quickly to lock in a deal earlier this year with Vietnam, for up to 1.5m tonnes later this year.

It says it has agreements to import as much as 2.7m tonnes this year, more than enough for its needs.

But by advertising this deal - and calling for other, largely token "rice-saving" measures like asking for reduced servings in restaurants - President Arroyo may unintentionally have given the impression that the crisis is worse than it actually is.

Certainly government stocks have been depleted - down to just two weeks' supply for the country at one point.

But there was never any likelihood they would run out.

Stockpiling

Ordinary Filipinos, seeing prices rise in the market and the high-profile actions of their government, began to panic. They bought up rice to store at home.

Far more seriously, alleges the government, traders began hoarding huge stocks in the hope of profiting from higher prices later.

Queue of people
There are long queues for subsidised rice amid fears of spiralling prices
The president has set up a special anti-hoarding and smuggling task force, which carries out regular raids on suspect warehouses.

Traders thought to be hoarding rice can be charged with economic sabotage.

This may deter others from doing the same, but the publicity these raids are getting only adds to the sense of crisis.

Some sceptics argue that President Arroyo may have exaggerated the rice crisis to distract attention from a series of scandals rocking her administration.

If so, it is a high-risk strategy. A perception that her government cannot feed its people might be far more damaging.

Just buying enough rice on the international market to ensure government stocks are replenished could cost the Philippines as much as 1% of its GDP this year, and put a huge dent in the budget.

Focus on farming

If there is a silver lining, it is that the rice crisis has sparked a debate over why the Philippines has never been able to achieve self-sufficiency in food.

The government has just launched an action plan to make its farming more productive.

In his paddy fields an hour's drive north of Manila, rice farmer Saturnino de Losario hopes the plan will be followed through.

"We need irrigation here," he told me. "With it we could get three to four crops a year, instead of just two."

"It's a catch-up game," said Agriculture Secretary Arthur Yap. "Maybe there was a mistake in the prioritisation in the past. But we can't cry over that now".

He points out that there have been real improvements in agriculture, with rice output growing at 5% a year.

But this may still not be enough to match rising demand, especially with a population growing faster than almost anywhere else in Asia.

paddy field in the Philippines
The Philippines has never grown enough rice to be self-sufficient
Another debate now being fuelled by the rice crisis is over population, and the role the Catholic Church has played in blocking family planning programmes.

In 1990 the population of the Philippines was 60 million. Today it is approaching 90 million.

For decades, attaining food self-sufficiency has seemed a quaint and sentimental notion, rendered obsolete by the ruthless efficiency of globalised markets, where countries produce large amounts of whatever suits their land and climate best, and import the rest.

But rice is not simply a tradable commodity. It is the staple food for two-thirds of the world's people, and has an emotional and cultural importance far beyond its mere nutritional value.

For many governments, maintaining a reliable supply of affordable rice is viewed as crucial to social stability, which is why so many have shut off exports, to try to control prices at home.

That has left the importers feeling very vulnerable.

And this year no country will import more than the Philippines.




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