An Analysis on the Supply Chain of Rice in the Philippines1

Darwin R. Gevaa

____________________ 1 A research paper prepared and submitted in partial fulfillment of the requirements in EMG 272P: Supply Chain Management under Engr. Elisier Fantillo, 3rd term, AY 2010-2011.

INTRODUCTION

Rice is the most staple food in the Philippines; therefore, majority of the population depends on the said crop which is irreplaceable. It is the single most important agricultural crop in the Philippines, and is therefore a major source of income for millions of Filipino farmers (Cororaton, 2004). According to the Philippine Rice Research Institute, Filipinos highly depend on rice. However, there are still many factors why the country experiences such problem in supply and distribution of the crop and these are; increasing population, decreasing hectarage, damages caused by natural calamities, and also man-made problems such as poor management of reserved rice and etc.

The population of the Philippines is growing. According to the National Statistics Office as of the year 2010 the projected population reaches to 94. 01 million of Filipinos are in the country and abroad. With this fact, the supply of the rice in the country is still having difficulties in ensuring stability and adequacy in providing sufficient rice availability in the market all the time. Many reasons are typically advanced for the failure to achieve rice self-sufficiencyfaulty government policy, corruption, conversion of rice land to other uses, backward rice farmers, deteriorating irrigation systems, and lack of farm credit, among others (Dawe, et al. 2002).

Research Objectives

The main objective of the study is to analyze and determine the supply and demand of rice in the Philippines the problems that goes with the supply chain of rice from the farmers to the end users.

Specifically this study aims to:

Define rice as one of the most valuable crop in the Philippines; Determine the demand and consumption of rice of Filipinos in recent years;

Identify the issues behind the insufficiency in the production and supply of rice in the Philippines resulting to importation.

Scope and Limitations

The concept of supply and demand of rice in the Philippines and other underlying economic factors and processes is very complex in a nationwide perspective. Thus this research focuses merely in the data obtained from the government organizations that concern about the production, supply, and demand of rice. Moreover, time also set as a limitation in obtaining pertinent data to further explain the issues mentioned above. However, this research followed an organized presentation of data to compensate its limits.

Significance of the study

Rice is the most important commodity among all kinds of crops in the Philippines. Almost all Filipinos eat rice for breakfast, lunch, dinner, and even in between meals. Even though Philippines is an agri-based nation, still it encounters various problems in rice supply making it available to the public consumers. Thus, this study will be helpful in identifying further the cause(s) of such problem in the supply of rice specifically the supply chain management.

Research Methodology

In determining the supply, demand, and consumption of rice in the Philippines in relation to the concept of supply chain management review of related literatures was conducted. Furthermore, electronic sources from the government organizations were also included in the study. Statistical data were also incorporated from the said sources.

RESULTS AND DISCUSSION

The rice crop in the Philippines is the most politically sensitive commodity (Palatino, 2008). Therefore, such changes in the supply would actually affect the prices but not the demand since there it is inelastic demand for it in the country. Despite the fact that the country is agriculturally based, the problem of shortage as the government

says during the regime of former President of the country Gloria Macapagal Arroyo making the Philippines as one of the top importers of the rice in the world.

Agriculture statistics also show that rice is the biggest agricultural crops subsector covering 4 million hectares or about one-third of the total 11.9 million hectares of agricultural lands and contributing more than one-third of the total value of crops production. Rice is also the source of income of about 30% of the 11.2 million Filipino farmers and agricultural workers (Ignacio, 2005).

According to the Bureau of Agricultural Statistics the consumption of each Filipino grew from approximately 92 kg/year in 1998 to 128 kg/year showing an increase of 36 kg/year in just 10 years implying each and every Filipino consumes 18.4 kg/year to 25.6 kg/year in 10 years time only. In 2009 the consumption of Filipinos dropped by approximately 8 kg/year (table 1). Table 1. Rice: Supply and utilization accounts by commodity, year and item. Rice 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Bureau of Agricultural Statistics UT Per Capita kg/yr 91.91 99.68 103.16 103.77 108.03 107.02 116.09 118.8 118.7 126.24
128.10 119.92

On the other hand, in terms of the local production of rice (palay) statistics showed that there total production of rice in metric tons was increased from 8,554,824 in 1998 to 16,266,417 in 2009 which shows that there was an increase of production of 7,711,593 metric tons in just 10 years, although, it dropped by 549, 131 metric tons in 2009 (see table 2). Table 2. Volume of local production of rice per year. Rice 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Bureau of Agricultural Statistics Metric tons 8,554,824 11,786,625 12,389,412 12,954,870 13,270,653 13,499,884 14,496,784 14,603,005 15,326,706 16,240,194 16,815,548
16,266,417

Based on the data shown above, the local production of rice from 1998 to 2008 seemed to improve as the consumption of rice increases. Therefore, importation of such volume of rice shouldnt a priority of the government. Perhaps the issue of distribution from the rice producers to the end users seemed to have some loopholes resulting a problem of shortage of the supply of rice.

The problem of such shortage in rice supply in the country are dramatized by some firms or even the government itself to incur higher profit engaging in one of the endemic diseases of the country which is the issue of corruption. According to ABSCNS News anomalies among the agricultural government organizations manipulates the data of bloating the statistics of consumption to import more rice, while, the local rice industry suffers from loss. The issue of hoarding in country seemed to have an effect in the supply of rice. Undeclared warehouses proliferates the issue of rice shortage. Moreover, the government has no exact data to tract such warehouses that keeping rice to lead rice supply problem. The diagram below shows that monitoring the rice supply distribution was not actually specified and emphasized.

Figure 1. Rice activities in the Philippines.

Conclusion and Recommendation

Rice as mentioned is the most politically sensitive commodity in the country making it vulnerable to price changes in accordance to supply. The supply of rice in the Philippines is increasing by approximately 6% each year. However, problems in production such as insufficient financial support to farmers still a hinder in progress of local rice supply.

Solving such problem in the supply of rice, the government should allocate more budget in the production level by providing sufficient financial support to farmers for seeds, irrigation, post harvest facilities, adapting and implementing new technologies, and etc. Also, one of the crucial factors in this concern is the supply management system of monitoring the whole rice industry from the farmers to the end users. The government definitely lacked in this part since there are those that hoard rice supplies which are not observed. The government should design or have a system tracking all the production of rice from the farmers going to the government warehouses. In this case they have traceability where the rice going through and one advantage of this is that they will have a good inventory system of the rice. If they could have the access and data it will help them in the forecasting of rice for imports. A very effective I.T. system that tracks the movement of rice from producer to warehouses to end user will help us in some rice shortages problem.

REFERENCES

Palatino, M. (April 2008). Why a rice shortage in the Philippines? UPIAsia Retrieved March 14, 2011. from http://www.upiasia.com/Economics/2008/04/02/why_a_rice_shortage_in_the_phil ippines/6495/ Dawe, D. et al. (2002). Why the Philippines Import Rice? International Rice Research Institute. Retrieved March 14, 2011. from books.irri.org/9712202097_content.pdf National Statistics Office Retrieved March 14, 2011. from http://www.census.gov.ph/ Philippine Rice Research Institute Retrieved March 14, 2011. from http://www.philrice.gov.ph//index.php? option=com_content&task=view&id=12&Itemid=296 Ignacio, J. (2005). Trading-off Philippine Rice. Integrated Development Foundation of the Philippines. Retrieved March 14, 2011. from www.irdfphil.org/docs/tradingoffphilippinerice.pdf Cororaton, C.B. (2004). Rice Reforms and Poverty in the Philippines: A CGE Analysis. ADB Institute Research Paper Series. Retrieved March 14, 2011. from http://www.adbi.org/files/2005.01.14.rp57.rice.reforms.philippines.pdf