Rice and the warehouse law

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Part of The American Chamber of Commerce Journal

Title: Rice and the warehouse law
Language: English
Source: The American Chamber of Commerce Journal Volume 9 (No. 12) December 1929
Year: 1929
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Fulltext: December, 1929 THE AMERICAN CHAMBER OF COMMERCE JOURNAL 11 Rice and the Warehouse Law By Percy A. Hill Prices offered for the new crop have registered a substantial decrease being from 1* * 3.50 to 1 * 3.70 per cavan of palay with a tendency to further decrease. Rice prices at consuming points are slightly lower than last month’s, but. as soon as stocks acquired at high prices ate dis posed of they should be better. It is expected that there will be little fluctuation in prices this year, in spite of the dislocation of the market by the warehousing law and the holding back of supply in producers’ camarins. This gives us approximately some 2,000,000 more cavans than last year. Requirements for the above five provinces is placed at nine and a third million cavans, the balance being avail able for sale. Imports, as a consequence, will be slight—unless undue dislocation of the supply is forced upon the distributors. Yields are spotty but in the aggregate should come close to those of 1927, the greatest crop ever produced in the islands. Part, of the increased area was due to favorable price offerings of last year, but offerings this year will in all likelihood be reduced by 25%, thus making a much smaller volume of money avail able to the producer and falling into the normal channels of trade. The question of price is always important to both producer and consu mer, but lack of warehousing at terminal points, forfeited by legislation, will work adversely to the producer this year. Beginning with January, business interests engaged in the rice industry find that profits accruing to them are so small that, they are unwilling to add unnecessarily to the burden. The law goes into effect on January first. Boiled down, the filing of bonds to cover deposits in the amount, of 1*2.50 per cavan, with the idea of protecting palay depositors, has resulted in the loss of the entire deposit function, the millions of pesos of credits normally extended the pro ducer, the sacks delivered to him free, and his consequent price enhancement. In this case business which supplied all these things free to • the producer has decided that the burden is too great and they will therefore simply buy outright , mill and sell rice to the consumer. A depositor was of course not protected by insurance, but t his could have been accomplished by extending the insurance, the depositor paying the premium, which is the way it should have been done. The deposit, function, built, up with great care during the last, fifteen years, was a godsend to the producer. He paid no fees or shrinkage, if the crop was sold before October. He was given the privilege of storing bis surplus in warehouses dose to terminals. A large credit was supplied him on his deposit, without interest of any kind. Sacks were supplied him free, and money advanced him on hispromisory note— in advance of the delivery of his crop. There is not a single entity, governmental or philanthrophical, which would do this, and no other in dustry enjoyed like benefits. The only gain the highly compel it ive Chinese interests ob tained was the stabilizing of supply to fill their Estimates of the coming rice crop are very favorable. The Central Luzon provinces which supply interprovincial requirements are analys ed as follows: The 1929-1930 area planted was approximate ly 622,800 hectares of which some 45,000 regis tered a decline in yield due to plant pests. The very favorable season since July and the ideal pollenization conditions more than make up for any loss. Rainfall was well distributed, aver aging some 25% more in volume than last year’s, or in the ratio of 62 to 87 inches ap proximately. Province Towns Cavans Nueva Ecija............................ 27 Pangasinan............................... 46 Tarlac....................................... 17 Bulacan.................................... 23 Pampanga................................ 20 8,686.000 7,774,000 2,531,000 2,088,000 1,674,000 Totals................................ 133 22,753,000 milling contracts, which in turn supplied inter provincial requirements. The way the warehousing law reads may sound good, but in its attempt to cuff the ears of a few reckless warehousemen in Bulacan, it landed a knockout blow to the producer. As a consequence, the greater part of the crop will be bought up at market prices, which generally register low at the time of deposit. The other portion will remain in warehouses on the farms, awaiting demand. This demand will not. mat erialize if high prices are requested, and imports will be utilized to meet the demands of the con sumer. All the blah-blah about the Chinese fixing prices is merely bunk. At times business cannot be done at a profit under laws which penalize it. In this case the road is open to everyone who desires to enter the warehousing business under present con ditions. If this is favorable they should im mediately embark in it, without further chest thumping, scarehead propaganda, or begging the question. As to success, let us say nothing. As to the ambition, it is legitimate. If profits are to be forthcoming, now is the time, as the crop is good and conditions favorable. They need fear no competition under the present law as to date -we have heard of no one who cares to embark in the business of storing palay. But there should be less careless talk and more action. The rice producer in general holds no brief for either. All he wants is a fair price for his product and the enjoyment of as many fav orable mechanisms as arc reasonable. Like the consumer, neither race nor color bother him, if he gets the price . So far we have not heard of any bouquets to be presented to the chap who has deprived them of some millions of pesos, but they are beginning to think. No matter how we deplore the inability of the producer to enter business, through cooperatives, we must admit that his function lies and will lie in production and its consequent yields. Anyone with a third grade knowledge of arithmetic can see by the daily papers exactly the spread between the raw and processed material—palay and rice. This should be enough to terrify the ordinary individual, but we have the unterrified with us as of yore. The idea of the cooperative is to control supply with an idea of collective bargaining. What about the other end of the business, the consumer? He will not be happy if he has to pay the price saddled upon him by monopolies, in addition to the tariff which itself is ample protection. Cooperatives have not always been successful, and most certainly not in the daily food require ments of peoples. The pool is entirely a dif ferent proposition dealing not with domestic supply, but with export surpluses, and not all pools are successful. Those familiar with co operation know full well that if applied to co operatives, it requires a business man to head it, and we have no better business men than the ones who have built up the rice industry, who extend credits without interest, who distribute efficiently and cheaply. There is nothing hap pening in the dark as regards the rice industry except, perhaps, legislation, which never un derstands business. The idea of scrapping a perfectly good machine for an inadequate one is nothing but pure unadulterated foolishness. If cooperatives are desired, why not concen trate on lines which show a profit, rather than on those which show such small spreads, and then hire a business man to run the business. If they can compete with present mechanisms there is no law stopping them. As for the rice industry, there would be no bond required of a cooperative; instead, they would have to build their own warehouses, invite deposits, pay a host of ignorant operatives and take a chance on collect ive bargaining. If they went into the processing of their product it would mean a high capital investment without an adequate outlet. If they extended it to take in the distribution function, they would face an impasse. If they expected to advance credits to the depositors they would have to look up a banking connection, and they could not distribute to their patrons the profits until their entire stock had been disposed of for the year. With these require ments in mind, the way is open for cooperatives! No cooperatives we know of have ever flour ished if built from the top, or if forced upon producers against their will. The mere regis tration of firms makes little difference if they cannot function at a profit for business is not built that way. Nor can it be said that one man or any group of men have the ability to outguess the market every time. The Chinese here in the business for centuries have not been able to do that, nor anyone in the United States, either. As a matter of fact producers have only one wav to seek solid gains, and that means higher yields from the lands they own. It means concentrating on production rather than on distribution, a very different thing. The pro cessing of their produce has been the rock unon which far too many have been wrecked, for generally speaking producers are not business men. The whole trouble in the Philippines is the urge to build from the top. Too many move ments are in their infancy, desiring to run before they can walk. Too much ignorance prevails as to just what business is, and too much enmity prevents a cool consideration of actual facts. It may not be known to our Patrick Henrys that many firms are now liquidating rice at a loss of thirty centavos a sack, to enable them to mobilize cash for the new crop and to clean off the old crop accounts. We can imag ine the howl of a cooperative faced with this, but we cannot imagine them doing it. The way, however, is open to all who desire to enter the business. With regard to the irrigation facilities sup plied bv the government, we may say, taking into consideration present projects functioning, annual crops, and ordinary increase of popula tion, that a limit has been reached. It is true that a certain amount of irritation exists against these projects but this urge is due in part to illconsidered estimates, the annual payment of irrigation fees and, last but not least, the hope held out by politicians of exempting beneficiaries from payments altogether and saddling the government with the cost—as in other countries. Irrigation increases yields by approximately 8% but its function is crop insurance, a much more important phase of production from a national standpoint. The amount of fees collected is small as against the benefits re ceived. As no government is stronger than its producers, it might be that a way out would be to make a flat rate per hectare, under the name of service, that would repay over a long period the costs and interests, collected with the or dinary land tax. Where the land is so poor that the growing of rice rarely pays, the extension of irrigation to that area is not feasible. Further more, as in good years we are practically selfsustaining as to rice, any further extension is simply forcing the rice industry into the status of the sugar industry, with the exception that sugar has a market and rice has none, being a protected crop. The above is worth while thinking over, before raising any more bonds for irrieation, as further expansion is approaching the danger line. Short Short Short Story Once there was a clever little girl named Susie Scrugs. Well, Susan Scrugs learned to dance and so Suzanne Scrugs went to New York. And, happy to relate, Suzanne Swan made good. So a rich old millionaire married Mlle. Suzanne de Swan and now Mrs. Harry Smith lives abroad.—Life. I have never jumped out of an aeroplane with a parachute that was slow to open, but one time I returned from a week-end trip and saw a telegram under my door.—Life. I know why auto drivers are always in such a big hurry. They are speeding up to get in front of you so they can slow down.—Life.