Sunday, January 11, 2009

Philippines: Govt. subsidy program to offset rice price hikes.

This is from the daily Tribune.

The price of rice in the Philippines is almost half of what it was at its peak. However as the report projecting prices notes there is less investment globally in inputs due to the credit crunch. As a result the total rice production may decline without a corresponding decline in demand. As a staple, rice demand is less elastic than with many other commodities. Also, declining incomes for many in the Philippines may mean hardship even if the price of rice does not reach its peak of last year.


Palace subsidy program to offset rice price hikes
By Riza Recio
01/11/2009
Malaca├▒ang yesterday expressed optimism the price of rice would remain affordable throughout the year even as it assured the people of its readiness to implement a contingent rice-subsidy program to soften the impact of a sharp rise in the price of the country’s staple crop.
Cerge Remonde, head of Presidential Management Staff, made the assurance following the reported forecast by the International Rice Research Institute (IRRI) that the price of rice would rise sharply this year owing to the worldwide credit crunch seen to make it hard for farmers to secure cash to purchase essentials such as seeds and fertilizer.
IRRI’s forecast is contained in its latest edition of quarterly journal Rice Today.
In an interview over Radio ng Bayan, Remonde expressed surprise over the IRRI forecast as he noted that domestic rice production posted “good harvest” in recent months. Remonde’s PMS regularly monitors government programs and projects, including those that pertain to agricultural production.
Nonetheless, Remonde said the IRRI forecast had prompted the Arroyo government to fine-tune its rice subsidy program, which it launched last year when world crude oil price soared to more than $100 a barrel.
But even when world crude oil price tapered off and slumped to just over $100 a barrel, the country’s economic managers crafted a contingency plan that would ensure the country’s sufficiency in food, including staple crops such as rice and corn, in critical times.
Malaca├▒ang said this contingency plan included a food sufficiency program that would effectively ensure that staple crops would be sold at affordable prices.
As reported by the Agency France Presse, the IRRI predicted that rice prices would likely to rise sharply for the second straight year in 2009 as the worldwide credit crunch would compel farmers to scrounge for cash to enable them to buy seeds and fertilizer.
The IRRI said the economic downturn would result in falling incomes that might compel the poor to switch back to less expensive staples.
The price of rice rose to $1,080 a ton last April, triggering fears of social unrest.
It slid to about $575 dollars six months later due to record production.
Despite this record production, the IRRI said “production uncertainty due to tight credit and declining rice prices combined with strong demand growth points to another rise in rice prices in the coming months.
Even if they had the cash, the IRRI said, farmers burned by the sudden plunge in commodity prices “will likely play safe and reduce input for their 2009 crops.”
The institute pointed to a decision by the Philippines government to lower its 2009 rice output estimate by almost four percent, and said a similar move from other rice producers “is likely in the near term.”
While global rice output reached record levels for each of the last four years, this was achieved through increased acreage and obscured the key issue of declining growth in rice yields owing to reduced agricultural investments since the early 1990s, the IRRI said.
As the world consumed more rice than it could produce in five of the last seven years, it forced governments to dip into their reserves to make up the shortfall.
Historic low levels of rice stocks contribute to the volatility, it added.
While rice prices have dropped from their 2008 peaks, the IRRI said, “they are still high relative to 2007 levels, and are likely to remain too high for millions of poor.
“If the yield growth rate does not improve, we can expect rice prices to continue to rise, and at a faster pace than that seen since prices started moving up in 2000.”
The institute said the only solution was to boost rice yield growth through higher investment in research, and developing agricultural infrastructure to allow rice farmers to put new scientific breakthroughs to work.

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