MANILA, Philippines—A little less than 13 years ago, in August 1995, rice prices in the Philippines went through the roof, almost doubling practically overnight. A combination of bad weather (El Niño-induced drought), bad timing on import decisions by the National Food Authority (NFA), and profiteering behavior by suspected rice cartels brought back the rice queues that had not been seen since the 1960s.

I remember the time only too well. As Neda director general then, I and my Cabinet colleague Agriculture Secretary Roberto “Bobot” Sebastian had a lot of explaining to do—I for the sudden spike in the overall inflation rate, Bobot Sebastian for the rice shortage. Both of us were receiving those famous 5:00 a.m. phone calls from then President Fidel V. Ramos, in a period that was to be among the most memorable in my eight years of government service.

Thin market

Fast forward to March 2008, and the same scenario appears to be playing out once more, this time with a major difference. The problem back in 1995 was purely internal to us; nowadays the rice supply tightness extends well beyond our shores. And while we could have avoided the rice queues back then with a timely decision by NFA to import the commodity, these days even finding a source to import the vital commodity from has not been easy. And our import requirement now, running well over 2 million metric tons, is almost three times what we needed to import back then. (We had in fact even managed to make a small export shipment, about 35,000 tons, just three years before that 1995 rice crisis.)

The problem with the world rice market then and now is that it is a relatively thin market, with only about 7 percent of total world production being traded internationally. And now, India and Vietnam—both key suppliers in world rice trade—have both cut back exports due to rapidly growing internal demands for the commodity. China, also facing surging demands due to rapidly rising incomes coupled with large-scale conversion of farmlands into industrial and residential zones, has switched from being a net rice exporter to being a net importer.

Price hikes

The supply tightness is now showing up in rising world prices, with spot prices already hitting more than $700 a ton, more than three times the level just five years ago, and 47 percent above what we reportedly paid just last January. In Thailand, the world’s top rice exporter, industry officials foresee prices rising to $1,000 a ton, and quotes in the rice futures market appear to bear this out. Among other things, surging oil prices are making fertilizer production more expensive and transportation more costly. Meanwhile, world supplies are further threatened with the possible return of a deadly crop disease that reduced Vietnam’s rice yield last year.

It was thus fortunate that we even managed to secure a supply contract with Vietnam for a million metric tons last week, the language of which some think may not even be a solid commitment to provide the commodity if and when crunch time comes.

Largest importer

We now have the dubious distinction of being the largest rice importer in the world—the result of rice productivity lagging behind our rapidly growing population. Irrigation coverage, the single most important determinant of our rice productivity, had reportedly even declined (to less than a third of our total irrigable area), due to deterioration and non-maintenance of existing facilities through the years. And this happened notwithstanding a law passed in the 1990s (albeit unenforceable from the start) that would have us attain 100-percent irrigation coverage in 10 years—proof that a country cannot simply legislate its way out of a problem.

Our rice productivity had in fact been declining through the years. Apart from declining irrigation, many years of unsustainable inorganic and chemical-based monoculture rice farming had apparently been degrading the soil in our traditional rice lands. Declining irrigation itself was also the result of deteriorating watersheds owing to rapid forest degradation. On top of that has been the continuous conversion of prime farm lands into non-farm uses.

Age-old failures

But it is not only science that will solve our rice problem. Declining productivity has as much been the result of an institutional environment that gave little incentive nor capability for farmers to invest in productivity improvements. With rice cartels lording it over rice trading, rice farmers continue to receive farm gate prices that are hardly remunerative. And with farm credit continuing to be dominated by usurious informal lenders and traders themselves, farmers have little capability to spend for productivity enhancements even if they were available.

The short-term solution to the current difficulty is inevitably more imports, to the extent that we can find the rice to import. Over the longer term, there is no escaping facing up to and coming up with new approaches to our age-old failures in the basics: Irrigation, farm credit, and addressing the uncompetitive elements in the rice trading system. Meanwhile, we’re in for even higher rice prices, and that’s a reality we can’t seem to avoid, at least for the near future.

Comments are welcome at chabito@ateneo.edu