Home 
Because rice is a staple product and staples have low demand elasticity, it follows that any disruption in supply will lead not to marked decrease in the quantity of rice that we buy from the sellers but in the steep rise of its price. Knowing this, what are we to do to stop the rise in the price of rice? Let me leave that for the moment.
If we look at the market for rice, it is easy to see that because rice is a staple product its demand is greatly determined by the size of the country’s population. On average, we consume just over 100 kilos of rice per year. With this, our yearly total demand for rice in the country would simply be the product of multiplying 100 kilos by the number of our population. In 2000 we had 76.9 million people and this translated to a total demand of 7.69 million metric tons (MT) of rice.
Against this backdrop is the government data that in 2000 we produced a total of 12.4 million MT of rice (palay) and imported another 639,000 MT (milled). This gave us, therefore, more than enough supply of rice, even if we wasted a good part of our rice harvest during milling and transport before it reaches our table.
Growing at about 2.3 percent annually, we now have about 92.2 million people in the country this year. This translates to a total demand of about 9.2 million MT of rice. Last year, government data says we produced a total of 16.2 million MT of rice. Given our production of 12.4 million MT of rice (palay) in 2000, this implies an annual growth rate of about 3.9 percent in the last seven years.
Based on this, therefore, and given that the weather is good, our rice production could easily increase by around 3 to 5 percent to reach 16.7 to 17.0 million MT this year.
Unless we are wasting a lot of what we produce during milling and transport now than in 2000, there should be no reason why we would have shortage of rice this year, even if our rice import is reduced due to the scarcity of rice in the world market. But the local market says we have a shortage, as indicated by the steep rise in the price of rice. If that is the case something must be wrong with our government rice production data.
The truth is that despite our reported bountiful rice harvest in the last seven years under this administration, the volume of our rice imports increased by 18 percent from 2000 to 2006. From just over 639,000 MT in 2000, our import increased to 1.7 million MT in 2006. All these point out only to the most obvious – that in reality our country’s production of rice has not been growing at the pace reported by the government. It could even be actually declining, if we consider that much of the country’s rice lands, particularly in Central Luzon and Southern Tagalog, are now converted into residential, commercial, industrial and other uses, as they benefit from the overflow of Metro Manila’s growth.
I am not against any conversion of land use in these two regions or anywhere in the country, of course, but if such can lead to more and bigger problems in the country, like food shortage, then it could be more damaging. Something should be done to control land-use conversion. But since the problem of rice shortage and the steep rise of its price are already there, what else are we to do?
First, of course, is that it’s time for the Arroyo government to clean up its data so we can be forewarned of any problem in the future, like rice shortage.
Second is that it is also time now for us to realize that government intervention in the procurement and supply of rice in the market will lead only to more problems, as it will only distort the operation of supply and demand forces. Have we not learned enough from the collapse of the communist countries whose governments had the say in almost everything that must be produced and supplied to the market? And look what is actually happening with government control in the market for rice? It only leads to rampant smuggling or corruption of our people in government who exercise the power of control in the procurement, importation, and distribution of rice in the local market.
In controlling the rice market, the government has for its objectives the protection of the poor farmers, who could not wait for long in disposing their harvest at the right moment to get the right price, and the poor consumers, whose income are mostly spent on rice and other basic items. This objective is laudable but the way it is carried out is wrong.
First of all, when the government subsidizes the price of rice in the market, it unwittingly subsidizes also the not so poor, even the rich, among us. Paying the farmer a guaranteed floor price is also good, but if it can only be done for 10 percent of our production, it is useless, as we can see in the declining interest of our farmers to plant rice these days.
