Balance

"This is what we need to achieve."

It has been reported by even international grains agencies that the Philippines is well on its way to importing a total of 3.1 million metric tons (that’s 62 million bags at 50 kgs each) for 2019.  This would be some 63 percent higher than our total imports of the staple last year.

This probably would be the highest country import for rice, second only to China’s announced 3.4 million tons.  But hey, we are 105 million compared to China’s 1.4-billion consumers.

Prior to this record, the country imported some 2.25 million tons during the last year of the Arroyo administration, and about the same in 1998, when we had a prolonged drought as well.

Passage of the rice tariffication law and the removal of NFA’s import monopoly, it would seem, has caused a flood of imports from the private sector.  And while this has depressed rice prices for our consumers, it does have a negative effect on the income of our palay farmers, some three million of them.

The Department of Agriculture projects a total rice harvest of 12.2 million tons this year.  Consumption, on the other hand is some 14 million tons, at roughly 135 kilos per person per year.  The expected shortfall between domestic production as against consumption would be some 1.8 to 2 million tons.

But we are expected to import 3.1 million tons from various sources, mostly our Asean partners, creating a huge surplus of 1 million tons owing to the opening of floodgates for importation since the end of government-imposed quantitative restrictions.

As a result, palay farmers are getting less for their harvests, and market reports say the farm gate prices are as low as 14 pesos per kilogram of palay, just some P2 above estimated cost of production. Compare this to last year, when palay sold for 21 to 23 per kilo, even more.

We are entering the lean months (July until September) with sufficient inventories, some 81 days of normal consumption as of end-June, even as imports have continued to arrive in July.

The National Food Authority no longer imports rice since the rice tariffication law was passed last March, and has practically used up its budget subsidy for domestic rice purchases. As of end-June, it has bought 5.4-million bags (270,000 tons) at 20.70 a kilo for dried palay.  That is its highest on record since 2011.

Still, the total volume of NFA domestic palay purchases is just a drop in the bucket compared to what the farmers sell to the private sector at prices as low as 14 pesos per kilo.  Yet, even if they want to sell higher, at say the NFA’s recently adjusted buying price of 20.70, farmers cannot access NFA’s limited capacity.

Furthermore, at P20.70 per kilo of palay, NFA has to sell at roughly P40 per kilo of well-milled rice to break even.  However, it is still mandated to sell at the highly subsidized retail price of P27 per kilo.

Eventually, NFA’s losses will pile, and its debt increase as well.  How long can the de-fanged rice agency sustain its domestic support operations?

And how will the flood of imports under the free trade regime continue to depress farm gate prices, creating disincentives for domestic production and massive income losses for our palay farmers?

The recently passed law (RA 11203) provides for a Rice Competitiveness Enhancement Fund (RCEF) to be used to help farmers adjust to the new regime of free market imports.  The fund, estimated at P10 billion annually, will be sourced from the tariff revenues expected from the rice imports. 

But already the Federation of Free Farmers has raised the specter of misdeclaration of import values by the private imports, based on a simple calculation of the Bureau of Customs collection of P5.9 billion on an import volume of 1.43 million tons since March when the new law took effect.

For indeed, at the prevailing average market price of 400 US dollars per ton, of which the duty is 35 percent of value if imported from Asean countries (which comprise the bulk of our sourcing), the BOC should have generated revenues of some P10 billion already.  This assumes that all imports are of the 25 percent brokens variety.

The farmer’s group thus claims that importers must have under-declared the value of the rice they imported, and the BOC may have been taken for a ride.

Rice is a fungible commodity, and different grades of rice command different prices.  The BOC understandably may not have the expertise to know the difference between 5 percent brokens and 25 percent brokens, even less.  Or fancy varieties versus common varieties. Only the NFA has such expertise.

There must be some cogent explanation coming from the BOC on the complaint of the FFF.  In any case, the implications on our rice farmers and domestic production  forebode grimly, unless a proper systemic balance can be made.

While lifting the long-imposed QR on rice is salutary to stabilizing the price of rice for our consumers, balance must be made vis-à-vis domestic production.  We cannot permanently rely on importation to achieve food security.

With climate change a given, the world’s limited supply of grains cannot always be properly assumed.  For example, what if China decides to build more dams that would impede the sources of water that flows from its highlands down to the Mekong River, which supplies the water feeding Southeast Asian paddy fields?  Farfetched one might say, but still a possibility in an uncertain world, where conflicts remain, even exacerbated by the great economic powers.

There are challenges in trying to achieve balance.

There are models and templates done by our less than rice self-sufficient neighbors, such as Malaysia and Indonesia to assure food security.

And we are soon to have new leadership in the Department of Agriculture, while the President has just appointed a new National Food Authority administrator from the career service with experience dating back to the Marcos years.  Apart from ensuring that tariffs which would go into the RCEF are properly collected, a responsibility of the BOC, it matters more that said funds are properly utilized to help our palay farmers cope with the competition from imports.

There are creative ways of achieving the proper balance between the economic imperative of controlling food inflation vis-à-vis the need to continue growing enough for our staple needs from domestic production. 

This is what our rice overseers in DA and NFA need to achieve—balance.