CASE 7: The Rice Crisis in the Philippines

Who would ever think that a country rich in farmlands couldsuffer from a rice crisis? Rice is a staple food in thePhilippines. To many Filipinos, no meal is complete without rice.As a nation, we consume around 33,000 tons of rice daily. ThePhilippines is one of the top importers of rice, roughly importingabout 15% of its total rice supply. Our imported rice usually comesfrom neighboring countries such as Thailand and Vietnam. In 2008,there was an increase in the demand for rice in China, Africa, theMiddle East and India.

Today, the price of rice in the market is upwards of 42.50 pesosper kilo. The price increase due to numerous reasons. First is thehigh cost of cultivation and maintenance of our agricultural lands,which are scattered throughout different parts of the country. Thismeans that mass production is difficult since the lands are notconfined to a single area. Transportation costs are also shoulderedby the suppliers.

Second, our country lacks access to fresh water for irrigation.Also, more and more farm lands are being converted into industrialareas.

Third is that price of crude oil. In recent years, the price ofcrude oil has fluctuated creating a domino effect whereinagricultural materials such as fertilizers have also become moreexpensive. The National Food Authority, the government agency incharge of rice production cannot keep the price and supply of ricestable, leading to a tendency for rice dealer to increase the pricebecause of the unsteady supply.

Fourth is global warming. Studies have shown that a one-degreeCelsius increase in global temperature will result in 15% lessyield for agriculture. Natural disasters such as floods anddroughts also have a negative impact on agricultural production.The rising population of the Philippines also contributes to therice crisis. Rice production cannot cope with the populationgrowth. All these factors contribute to our dependence on riceimports, the continuing crisis in rice production and the increasedprice of rice in the market.

Filipinos spend 24% of their income on rice, making it difficultfor them to buy other basic necessities when the price of riceincreases. It may look like rice producers earn more by increasingthe price of rice, but in reality, the profit goes to thedistributors, who buy rice from the producers at lower price.

Questions:

1. Which forces in the macroenvironment contribute to increasedprice of rice and the rice crisis in the Philippines?
2. Which aspects of the microenvironment have been affected by therice crisis?
3. What do you think is the immediate solution to the ricecrisis?

Answer rating: 100% (QA)

A macro environment is the condition that exists in the economy in general instead of in a specific area or locale When an organisation operates in an ... View the full answer