Socio-economy

No action against food shortage actually

Several years ago, I was working for about 2 years in the food industry. I had come to realize back then that the increase in price of rice is quite inevitable. Luckily, the government made 5 initiatives in order to curb the rising prices of rice. These initiatives are;

  • Maintaining the controlled price of between RM1.65 and RM1.80 per kilo for the Super Tempatan 15% rice.
  • Ceiling price for Super Special Tempatan 5% at RM2.80 per kilo and Super Special Tempat 10% at RM2.70 per kilo effective 1 June 2008. Note that the 5%, 10% and 15% percentile means how much percentage the quantity of broken rice in a kilo. That is why 5% rice is slightly more expensive than the rest as it has less broken rice in the mix.
  • Price of imported rice are floated.
  • Movement of rice across state borders is to be freed in stages.
  • Raising the Guaranteed Minimum Price (GMP) for farmers from RM650 to RM750 per tonne.     
     

Apart from that, the national stock buffer will be increased from 92,000 tonne to 292,000 tonne. Will this solve the looming crisis of price increase? Probably yes. Will this solve the actual root cause of the problem? Sadly no. The root cause of the price increase is the shortage of food worldwide. But the government seemed to tackle different issue altogether.

I can see that the government had approached the problem from the consequential evidence, which is – people can’t afford to pay the expensive food.  What they should have done is to approach the cause of the problem – output of food supply is dwindling under the impact of increased demand (increased population + food consumption). So what did they do? By focussing on the consequence, they worked on the above initiatives which predominantly only tackling the pricing issue.

To me, one of the things that they should have done as in the case of this rice issue is to urge the local farmers to increase output of rice. From two seasons a year to 5 seasons in two years at least. Officially the farmers are currently producing paddy crops twice a year but I do know that most of them are only producing it once a year. The remaining idle months they spent doing something else. Let me tell you a secret; the farmers are a lazy lot. They scream and rant that BERNAS are squeezing them by only buying their paddy crops at RM650 per tonne. But at the same time, they actually are selling bad quality crops to BERNAS while their good quality crops are sold to the highest bidder in other private paddy mills not belonging to BERNAS. There were cases where BERNAS officials found debris, rocks and tree branches in a pile of paddy crops after it had been unloaded from the lorry right after disembarking from the weighing bridge. To accuse them of cheating will make the farmers run straight to the nearest ‘wakil rakyat’ and soon, BERNAS will be called all sorts of names in the Parliament for not thinking about the ‘welfare’ of the farmers.

BERNAS can’t afford to pay more than RM650 because to increase it, will make the price of rice too expensive for the end customers. Remember, a tonne of paddy crops will not necessarily be transformed into 100% of rice at the end of production. In a good batch of crop, only about 60% (this is called the ‘rice recovery rate’) of the whole tonne can be turned into pure rice. The balance 40% are actually the paddy’s inedible parts, its husk and other impurities. In a bad quality crop, BERNAS would be lucky even to reach 40% rice recovery rate.

Furthermore, the process of separating the paddy from its husk, cleaning, polishing the rice, sorting and packaging them costs another RM700 to RM800. Eventually, the total cost of producing local rice is between RM1,400 to RM1,450 per tonne. And what’s the price ceiling for the controlled local rice? Around RM1,300 per tonne. For every tonne of rice that BERNAS produces, they lose about RM100 to RM150. All in the name of social obligation. And how much does BERNAS produce rice locally? Around 1.3 million tonnes per year. That is why BERNAS who has an average sales of RM1 billion per year can only manage to gain profit before tax of about RM100 million per year or less.

Their production costs are eating 90% of their sales figure! And what saved BERNAS from being in the red? The imported rice. Inported rice from Thailand and other parts of the world is bought cheaply by BERNAS and sold at a higher price to the end users. But the import of rice is regulated by the government in order to protect the local farmers. Everytime BERNAS has to place and import purchase, they have to seek approval from the Ministry of Agriculture. That is why, import rice are limited to about 700,000 tonnes per year. If only BERNAS could at least break even on their local rice production, they can gain at least 30% more of their profit before tax.

The average annual demand for rice in Malaysia is about 2 million tonnes of rice. How do they arrive at this figure? Okay the average eating consumption of a Malaysian is about 80kg of rice per year. This is an average figure. It could be more or it could be less. Depends on whether a person likes pizza more or their ‘nasi campur’ more. But the difference won’t be that much. 80kg times the population of Malaysia at 27 million people gives you 2.16 billion kg or 2.16 million tonnes per year.

Approximately 2 million tonnes of rice per year will satisfy the demand of the Malaysian public. But why is there shortage? Easy. The foreign workers.

The accounted and the unaccounted (illegal) foreign workers. To date, the official count of foreign workers is slightly less than 3 million people including the illegal ones estimated around half a million.

Let me digress a bit by telling you a story of a friend of mine who went to China recently to visit some coal mines there. He visited a small village deep in the heartland of China. It was a small village by the Chinese’ standards because it only has a population of 12 million people in it! That wasn’t a typo. I kid you not. Now China has a ‘one child policy’ in placed since 1979. If a couple gave birth to a second child, they will be imposed huge fines upon the moment they wanted to register the newborn child. The fines were normally so heavy they had no choice but to leave the child unregistered all their lives. In rural areas, most families have children as many as they liked since they couldn’t afford to pay the fines for the second child anyway. The unregistered children may face problems in the future but they can still have adequate resources to live as they are geographically isolated and can afford to self sustain with the use of their own farmlands and making their own supplies etc.

Recently, they have millions and millions cases of young adults wanting to register themselves and had collected enough money to finally pay the fine and get themselves registered. For all we know, China, with the official population rate of 1.1 billion people could actually have 2 billion people instead!

Coming back to the topic at hand, foreign workers especially the Indonesians and Myanmars eat a lot of rice. The average eating consumption of Indonesians and Myanmars is 125kg of rice per year. With the huge surge of foreign workers in the country and the inability of the authorities to curb the rising number of illegal immigrants into this country, no wonder our food source is drying up as soon as it went into the shelves of hypermarts and sundry shops. This is a grave situation that the government had failed to see its many impact. Not just on the crime rate, but on our food supply as well.

Another matter which is the factor is the dwindling of cultivated lands. In Malaysia, each paddy fields are lined with dividers known as ‘batas’. This is purely territorial in nature. Historically, one paddy field owned by a farmer long ago could have reached the size of 10 acres each. But due to passing down inheritance to their descendants, the once huge paddy field is divided to give away to his many sons and subsequently divided further to his grandsons by the use of these ‘batas’. These dividers are eating up precious land area if you total them up together. An acre of paddy field can produce up to 5 tonnes of paddy crops in a season. But if an acre is strewned with so many dividers then the amount produced would be much smaller than 5 tonnes per season.

In Thailand (one of the biggest rice exporter in the world), there is no such thing as these ‘batas’. Each paddy field is so huge you can’t even see the edge of it if you’re standing at one side of the field. No dividers lining their fields in sight. Thus, the Thais can maximise their output. This was what BERNAS was trying to achieve some time ago but as usual, our territorial local farmers were so paranoid that they might confuse their own paddy fields to another if the dividers were to be disintegrated. Thus, they would rather keep their underutilised paddy fields rather than helping BERNAS to achieve greater output. They were too deaf to hear that an increase of output will eventually increase their income.      

I believe, taking everything into account from the above, those are the root causes of food shortage. Lack of reliable data to correctly calculate the demands of food supplies in the country vis a vis the rate of food production/output. The government should solve these illegal workforce problems, increase the output of farmers, motivate them to produce more before finally moving on to tackle the pricing issue. The food shortage will always be there regardless of the inititatives done to tweak the prices. In this, the government should be more focussed and should obtain more intelligent advice from the experts. Relying on just the Ministry of Agriculture to tackle this problem is not universally adequate. All areas should be covered and all ministries should chipped in ideas to solve the root of this problem.

Just my 2 cents…

 

8 thoughts on “No action against food shortage actually

  1. JMD~

    Nothing to dispute.. not accusing anyone.. of ill doing..

    Pak Petani told me, they get paid RM650/tonne.. they also get the subsidy from gov by selling it to Bernas. If they go to sell other miller/processed on their own, they lost that subsidy.

    In international open market, Rice is ~U$1000 /tonne.(RM3,300/tonne- average exchange rate this month)

    I like your theory that, sometime Pak Petani cheated.. they trashed tree branches/leaves or something to make up the weigh..claim the subsidy, then secretly sell their top graded harvest to black market. There is such possibility..

    Then again, what is stopping Bernas from using the same tactic to maximize their profit ? Selling it to black market or smuggling ..

    Like you said earlier, there is probably a third side of a coin that we are not aware of… 🙂

    Woody

    JMD : That is a possibility also. That is why, my main thought was, the govt should implement steps to overcome the food shortage instead of tweaking with the subsidies and rice prices. Because, we cannot forever try to manipulate the price if the root problem still persist and left unsolved. I firmly believe that the unaccounted, illegal foreign workers are draining our food supply aside from inefficient agriculture methods. All parties need to lock their heads together and brainstorm to come out with a more viable solutions.

    Woody, thanks for reading my blog. It’s quite lengthy as compared to your own blog articles. Short and sweet and direct to the point. Good one.

    Thanks again.

    Like

  2. i like your article. Somehow along the lines and paragraphs, my heart wondered whether the solutions given by government has more to do with :

    killing bernas so that somebody,somehow,somewhere would be able to open another bernas (eg bernas II or sykt kurang bernas) and then kill off the subsidy for end user under the reason of “it’s global and we cannot control the price”

    rather than helping farmers and end users alike.
    Tuah..tuah.. don’t play with fire , tsk!tsk!tsk! nanti ketuLAH.

    JMD : There were indeed rumors that the government is trying to create a new player in order to kill off BERNAS. You see, it is an open secret that BERNAS is ultimately owned by Tan Sri Syed Mokhtar and Shahidan Kassim. In 2005, there were talks that the PM was thinking of not continuing the monopoly licence to BERNAS after 2011. There was a power struggle at the top between the owners and the govt.

    The new CEO of BERNAS, Bakry Hamzah was not savvy enough to be leading the rice business as compared to the previous CEO. Hence, the Ministry of Agriculture was ill advised by BERNAS regarding the rice stock buffer.

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  3. JMD,

    I heard Malaysia is also trying to buy rice from Sulawesi to augment our buffer stock.

    I totally agree with you that the long term solution is to increase rice cultivation so we are self-sufficient. From what I read, Malaysia now exports 30% of her rice. That is truly putting our rice bowls at the mercy of global supply.

    Malaysia certainly paid a very high price for nation building when farming became a non-priority. That was one thing we didn’t emulate the first world nations when they industrialized.

    No use crying over spilled grain, I suppose. We need to deal with the current situation.

    Malaysia’s longterm plan for agriculture should also consider cultivation of other food crops. Getting used to eating alternative staples should be introduced. According to USDA, rice cultivation is more expensive than other food crops because of the higher cost of its fertilizers and the amount of water the fields need. We also need to rehabilitate and reutilize abandoned agricultural lands and persuade some of our people that farming is a noble profession. In fact, even a hip profession.

    As for short term solutions, one of the most important right now is to put in place controls (or enforce them if they already exist) to prevent racketeering, supplier hoarding and retailer price-hiking. The day before, CNN showed food riots happening in Egypt in spite of government assurance that supply was sufficient and food coupons being distributed to help lower-income groups get their essentials. The reason was rampant black-marketeering which probably traced its source to corrupt state officials.

    Something like that would probably not happen in Malaysia. Or, would it?

    Like

  4. JMD~

    Yes, the “unaccounted for” number is big deal. I have nothing against some migrant workers.

    Because most of them are hard labor, the ate big portion of rice compare to you and me, generally, due to their job needs.

    Ya, many side effects trickle down from importing of labors. Shortage of food is one of them.

    What our administration failed to see was possible way of automation to lessen the effect of labor needs. Again, many of those ideas come from brainy people (academics, R&Ds, private industries, gov funded research institution…), we should be moving up value chain.

    Woody,

    Like

  5. Hi Jebat,

    Your article on the food supply is very good and very informative. I live in the city, I do not know what actually happening on the farm land. Your article will be treated with great respect as I aknowledge your creative writing and reference of information.

    Thank you.

    JMD : Thanks for reading them.

    Like

  6. Hi JMD

    I can understand if soft commodities, hard resource minerals and fossil fuel price rise due to the changing demands from the BRIC countries but note that rice has always been consumed by the SAME ratio and amount of people even before India China or the rest of Asia found the new economica and social mobility, so I would gather rice is being pushed artifically in CBOT and is now a speculative attack. This is compounded by hoarding element. What’s your take?

    JMD : All the more reason for Pak Lah to counter the source of the problem. If you could have think about this side of the problem, I’m sure Pak Lah’s brilliant advisers have thought about this as well. But do we see any efforts being made? Did he talk in the international stage about this? Has he pressured the US govt or the relevant world agencies regarding this speculative attack?

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