Sleepless in Malacañang

DEMAND AND SUPPLY - Boo Chanco - The Philippine Star

Good intentions are fine. But good results are better when people are feeling the pinch of high prices.

President Marcos revealed he is losing sleep over food inflation. Nice to know, but it is what he does when he gets out of bed in the morning that matters.

True, that as president and head of the Department of Agriculture, he can do things an agriculture secretary will find difficult to do. DA officials cannot say no to the president.

But first, does he know what to order DA officials to do to alleviate supply and retail price crises in sugar, onions, eggs, etc? And not to forget corn, an essential ingredient for poultry and livestock feed. Its rising price is escalating feed costs that translates to high prices of pork, chicken, and eggs for consumers.

Second, while DA bureaucrats may not say no to him, will they follow through what he orders them to do? Many are too entrenched with the trading cartels responsible for the surge in food prices lately. They are not expected to act against their self-interests.

Third, does he have enough reliable data to use as a basis for his orders to the DA bureaucrats? As the senators found out the other week, DA data is either not available or unreliable. Without good data, he will be issuing orders blindly, will not be able to fix problems, and he will lose even more sleep.

The first logical order is to assign NEDA chief Arsi Balisacan to fix the data gathering of DA with the help of the Philippine Statistics Authority, which is a NEDA unit. Almost everything that must be done to deal with food inflation depends on having good production and market data.

The President gets credit for good intentions. But it is the results over the past six months that matter to consumers. As such, he gets a failing mark as secretary of agriculture and eventually as president.

Take sugar. Because he was clueless about the sugar industry, he believed the bulong of Senate President Migz Zubiri that there was enough sugar in the country and the 300,000 MT importation recommended by Usec Sebastian was not needed.

Sebastian was publicly roasted, lost his job. But to the credit of the President, Sebastian was eventually cleared of any wrongdoing.

Ironically, DA is now saying they got orders from Malacanang to import 450,000 MT of sugar, more than the 300,000 MT that Sebastian recommended. Is that 450,000 MT on top of the 150,000 MT approved for importation last September?

Industry sources tell me they are looking at average annual consumption of 2.3 million MT to 2.4 million MT vs. this year’s expected local production of 1.8 million MT. We will likely need to import more than 450,000 million MT.

The new sugar importation order is obviously a panic reaction. Sugar prices have not gone down... still at about P100/kilo. If there was enough stock as Zubiri claimed, prices would have gone down after highly publicized raids on bodegas of alleged sugar hoarders.

That’s the other thing. The usual response of our officials to rising prices is to scream hoarding and make token raids of bodegas. Only more supply can bring down prices when demand is high… not raids.

The damage inflicted on the economy by Zubiri’s zarzuela is considerable. Beverage manufacturers had to close down their processing plants. Small and medium scale food processing operations had to slow down or stop operations. There is a negative impact on employment and the economy’s growth.

If we had reliable data in the hands of bureaucrats with no vested interest, like the PSA, maybe President Marcos would have enough courage to rebuff Zubiri.

Then again, he should know SRA continues to defy his orders to allow the sale of sugar stored supposedly for export even when we haven’t exported for years and likely never will again. That’s sugar already here, and releasing those stocks as the President ordered, would have helped bring down retail sugar prices. Release those stocks before importing.

Keeping those stocks in the bodegas reduces available stock for the domestic market and increases the import requirement that allows favored traders to make more obscene profits. The President should have the guts to clean the SRA of vested interests.

Same thing with onions. DA has no reliable data on onions. Worse, the Bureau of Plant Industry that issues import permits has been responsible for delaying and increasing the cost of importation.

If we just allowed market forces to operate freely, decisions to import onions or sugar would be made in a timelier manner. Importers will want to take advantage of high market demand. And they will not want to import close to the harvest season because prices could be dampened.

Everyone should have learned by now from the lessons of the Soviet Union and Maoist China that when the government makes the decisions the market should make, shortages and other unfortunate calamities happen. Consumers needlessly suffer. Let our free market economy work.

If as president, he really wants to make the DA effective in assuring our national food security, he will need a lot of courage to even take the first step.

The first step is land reform. We have done our social experiment. The world knows about our good intentions of making farmers landowners. But the reality is, our land reform program is a failure. It only made our farmers even poorer and hungrier than before. Average age of farmers is now 58 and their children do not want to be farmers.

We need to consolidate farms, work with agricultural companies with expertise and financial might to modernize and increase our agricultural productivity. Farmers can be assured they have work and be compensated enough to keep their families way above today’s poverty level.

The next step is to help farmers market their produce. Mindoro farmers say they have enough onions for the entire country, but need cold storage for their harvests and help to bring produce to markets. Government must not look helpless in the hands of the traders.

Agriculture only grew 0.5 percent last year and contributed 0.05  percent to GDP. That’s hardly anything. That’s why we have food inflation.

The President is doomed to be awake every night.



Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco.

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