A SURVEY released by Philippine OCTA Research in early December highlighted inflation as the people's top concern. The October 23 to 27 survey showed that 57 percent of the 1,200 respondents cited inflation as the top worry, followed by a lagging wage increase of 48 percent and access to affordable food at 46 percent. Other national issues such as creating more jobs (29 percent), free quality education (26 percent), reducing poverty (24 percent), fighting graft and corruption (11 percent), promoting peace and order, fighting criminality, and Covid-19 control (all 9 percent) all pale in comparison to the inflation and food challenge.

The release of the 8 percent November inflation rate confirmed the suspicion that the current bout of inflation is related closely to food more than anything else. The food inflation for the month ran at 10 percent and accounted for 59 percent of the price increase. Moreover, domestic-produced food items are taking the lead in price hikes and are responsible for the highest inflation in 14 years. For example, the price of sugar is 38 percent higher than last year; corn, 27 percent; vegetables, 26 percent; and meat, 9 percent.

The supply-side challenge in food inflation

Food inflation refers to a broad rise in the prices of foods across the economy that erodes the purchasing power of the people. The poor bear the brunt of the food inflation because they spend more of their income on food than the rich. The lower 50 percent of the country's households spend more than 50 percent of their expenditure on food.

In a nutshell, food inflation reflects an imbalance in the supply and demand of a broad range of foods. The demand for food is inelastic, and its growth is predictable. Demand change is more closely related to population increases than other factors. Therefore, food supply and demand imbalances often happen on the supply side.
The most common cause of supply disruption in food are calamities, but their impact is usually short-term. Most food crops are short-cycle products; their growing season is just a few months. The production system disrupted can recover after the calamity and return the price quickly in a new harvest. In addition, most countries keep an inventory in the food supply chain to mitigate supply disruption from calamity.

However, when there is a persistent broad rise in food prices over time, one must look at the supply side issue of food production. In the latest Philippines Economic Update (PEU) released by the World Bank last week, the multilateral agency highlighted the need to boost farm productivity and urged the government to repurpose public investment to ensure food security. The country's agricultural sector is forecast to grow by only 0.1 percent from 2022 to 2025 after registering zero growth in 2020 and 2021. If the World Bank forecast is correct, one can easily see a food supply deficit of close to 10 percent by 2025 if we assume an annual population growth of 1.5 percent from 2020 to 2025.

Climate change complicates food supply security

The concern over climate change on global food production is intensifying as drought in China, Europe and the US happens at almost the same time in early summer this year. Preliminary results of a study at the Water and Food Systems (J-WAFS) Lab at Massachusetts Institute of Technology indicated the risk of extreme weather of too much rain or too little rain in any one place around the world has increased, and even worse, the risk of synchronous flood or drought has increased. The climate is getting more variable worldwide, with the world getting 15-20 percent more floods and 15-20 percent more droughts for only a small increase in average precipitation. As a result, the world's food supply chain is getting brittle. The study recommended an increased emphasis on storing excess grain in times of surplus to cut price and supply volatility during synchronous drought.

The storing of grains is often done in exporting countries globally for simple economic reasons. However, the practice leaves countries relying on importation to balance the supply shortfall to the food security challenge. In the politically sensitive food staple of the country, rice, the country imported more than 20 percent of its requirement or around 3.4 million tons in 2022; such a high ratio of importation exposes the country to food supply challenge, not to measure price volatility resulting from the timing of importation to avoid price collapse when importation landed during harvest time.

A holistic approach to address food supply challenges

The root cause of the food supply problem lies in stagnant productivity in the agricultural sector. For example, Philippine rice yield stays at less than 4 metric tons per hectare and sugar yield at less than 5 MT/hectare for years while the population increases, and climate change introduces more volatility to the production. Therefore, the traditional approach of boosting production through subsidies for fertilizer, seeds, machinery and improving irrigation might not increase production sufficiently. Moreover, climate change could dry up the irrigation canal, rendering traditional seeds vulnerable to adverse new climate conditions and fertilizer not working well to boost production.

The challenge to food production is worldwide, and the advent of precision farming started with drought-resistant seeds, spatial field management techniques that match field fertilization to plant growth and dripping systems cutting field water requirements are all designed to ensure food production stability under the new global climate change environment.

The Fourth Industrial Revolution offers many solutions to the world's new challenges. Philippines should use the new technologies to formulate a holistic approach to address the worsening food supply problems.