Smuggling as a Supply Game

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By VL Domingo


BEFORE transplanting, the farmer must have to buy at least 10 bags of mix-grade fertilizers for basal application to have a good crop. Because he has very little capital which he also borrowed from the usurer he buys only 1/3 of the plant requirement.

Furthermore, the price of fertilizer as an input initially went up by 136% (and it continues to increase), since only a few Chinese traders are  importing it, thus again limiting the supply of fertilizers which provides the plant energy for productivity.

This is specially so when planting during the dry season.  During the rainy season, somehow the farmers get free nitrogen from the air every time there is a thunderstorm that initiates nitrification. Meanwhile, his soil has gotten acidic after more than 50 years of chemical farming which was first introduced in the l960’s by ESSO (Standard Oil).

Not a few government employees lost their lives and jobs in the fertilizer subsidy scam for lack of supply.

A Regional Director in Lasam and a DA employee who knew too much about the scam were murdered.  The DA employee with his wife, and his only daughter who just graduated from college and a niece working with him as his assistant in their house in Bulacan were murdered in the middle of the night, wiping out the whole family.

Harvesting Headaches

When palay is harvested haphazardly, you again lose 15-20% of what you should harvest from your backbreaking efforts in farming. This is after the farmers spend a lot of money on chemicals to protect their fields from pests and diseases.

Again they need to contract at least 20 harvesters. The practice then is they get 10% of your harvest. This is after shaking off easily 5% of the rice particles to the ground and stepping on them.  They could save this if they could only hire harvesting machines. But there is none.

Worse, even the harvesters like the transplanters are gone.

In the barangays, there are two kinds of farm workers. There are those who want to harvest only while the others want to transplant only.

The practice of harvest sharing is gone; hence you could no longer be assured of harvesters on time. You have to wait for harvesters from the other barangay that may still have some harvesters. Meanwhile, the field rats are slowly harvesting your palay if you did not put a rat trap before harvest.  There is then a need to rent a combined harvester.

But for the moment only a few towns have it because it is very expensive.  It is too costly for an investor. Only a federation or a cooperative could afford to buy it and  rent it out to its members if they could raise the funds which is usually not available from banks and the government is not also investing on it.

Availability of Warehouses

Again the supply chain of the grains industry is broken by the lack of investments in warehouses. Only traders are investing and making windfall profits at the expense of the farmer-producers. This is where the trader starts making his profits. This is where the cartels come in.

Only a few own rice warehouses in Metro Manila and they connive to dictate the price in the market.

Recently, they even hired persons and provided them money to queue for rice just to dramatize that there is no rice supply anymore from the NFA warehouses. The NFA then had to release their buffer stocks which some unscrupulous NFA employees usually keep and allow it to rot and sell to traders for a clean profit and recorded as losses in the books of the agency.

Farmer cooperatives have been given funds to build their own warehouses, but their trading funds were mismanaged leaving them bankrupt. So in effect there is no supply of warehouse space even as they stood in the middle of the fields like “white elephants” in the middle of brown and barren rice land for lack of irrigation.

This happens because of subsistence farming as the norm that now needs to be transformed  into commercial farming with highly professionalized farmers federation to do the business of planting and trading palay and rice to supply the needs of the country and be truly self sufficient (not by statistical manipulations) .

Supply of Post-Harvest Facilities

Easily, 5-10% is lost in rice milling using dilapidated rice mills that are very inefficient. Part of the rice supply to the consumers is being given to feed mills for livestock instead of human consumption.

Drying in the highways shows the Jurassic way of drying palay which leads again to additional losses that could easily compensate for the 10% shortage that is reported every year.

Drying  and Milling are not integrated because of the absence of investors. The government could easily invest on this through farmer federations but is not being done. If the government shifts its policy to invest instead of subsidizing, it will be easier for them to  monitor the funds instead of using government money in anomalous subsidies and programs.

The millions of funds allocated by DA Regional offices for training monitoring, evaluation and support services can be realigned with the Government Social Investment Funds (GSIF) to finance the construction of post-harvest facilities, provide trading funds for the importation of inputs and buying palay from their members with incentives and selling to the government those that they could not sell for Quedan, stockpiling and buffer stocking.

GSIF is what is needed in completing the infrastructure in commercial rice production instead of just the farm to market road which others call as “road to my farm” among Congressmen and Senators.

Politics of Rice

The absence of rice supply in the market will topple down a President or he will lose his bid for re-election. This is the politics of rice. Thus a sitting President  (with or without him knowing it actually puts a  tacit approval  to his/her henchmen to DALPO (Do All Possible) and allow even smugglers to bring in rice just to make sure that there is no shortage.  Most often also this will be tolerated by his henchmen to keep them in power and in their high positions in government.

Thus, the previous President tolerated this sad reality through her  Secretaries of Agriculture. The standing order then was to produce or tolerate smuggled rice (to insure supply in the hands of the retailers). Along the way, sometimes things go wrong in this “modus operandi”.

One popular businessman lost his life when he told the President about a smuggled rice and the President without knowing the implication since it is a complex reality in food security, had the goods confiscated.   The businessman was then shot (as a double crosser) in his house probably even in front of his wife by telling on the smugglers.

The “Hunger Game” which starts with  government lies that there is sufficient supply, has now  graduated into a “Supply Game” which the government has failed to address by subsidizing creating anomalous transactions has now graduated into a “Killing Game”.

Paradigm Shift

Like history, these anomalies in the P300 billion grains industry will keep on repeating itself from administration to administration until Kingdom  Come unless there is a paradigm shift in dealing with this killing issue.

The first is to listen to what the farmers say (through their credible leaders) as a solution to this recurring problem of rice supply which starts from lack of palay supply, lack of seeds, lack of water, lack of inputs, lack of farm credit, which continues because of inefficient transplanting, harvesting, milling and warehousing thus making their unit costs higher than the world price which now results to unbridled smuggling of rice in all ports of the country.

The second is for the government to invest (not subsidize) in the commercial ventures of farmer federations and similar associations to now operate their own agribusiness.

The third is to allow the price of palay and rice to seek its own levels. When the farmers earn more because of free enterprise (not with government control) but with government investments, the farmers will produce more and better quality palay because they will now have regular incomes from the commercial venture in which they participated. They can then buy more manufacture goods and invigorate the manufacturing industry to be able to pay higher wages and can now afford to buy a more expensive rice directly sold to them by the farmers through cluster farming.

This will then enable the farmers to produce rice at lower unit cost, provide the supply needed by the traders and generate the local and national economy. With more incomes from palay farming then they don’t have to sell their seeds, keep some stocks for their use and will not become a consumer of rice themselves as claimed by many technocrats who are not even “walking the fields” just to justify their claim of certifying importation.