“While I keep writing about my worries, I keep hoping I am wrong”
The good news is inflation has cooled down to 4.7 percent, according to the Philippine Statistics Authority. This is down from 5.4 percent in June, and suggests a downward trend since the rate peaked in the first quarter.
DBM’s Pangandaman is happy with the “downward trend” in consumer prices, but PSA is saying they continue to monitor price movements, especially that of rice.
NEDA’s Balisacan is also worried, even as our economic managers repeat their prediction that inflation will hit the 2-4 percent range by the end of the year.
They could be whistling in the dark.
By now, our readers must have learned of India’s ban on the export of non-basmati rice. Basmati is hardly eaten in the Philippines, aside from being quite expensive. But India exports 40 percent of the world’s very thin rice trade.
Because of higher production costs, FOB prices of long-grain rice from Thailand and Vietnam have gone up to $630 per metric ton, up from $450 in May this year, when the National Food Authority told the president that they were holding only less than 2 days inventory of the national daily consumption of 32,000 metric tons.
The president listened to his optimistic DA officials who said we had a good summer crop.
But that summer crop is usually less than the major wet season-planted crop, which got soaked by floods in the central and northern plains of Luzon, aside from the Mindoro provinces.
The main floods hit Cagayan, Pampanga, Bulacan and some parts of Pangasinan, aside from the two Mindoros. Nueva Ecija’s rice fields got soaked, but their floodwaters flowed downstream to Pampanga and Bulacan.
Still, my sources in Nueva Ecija, the traditional rice granary, are expecting lower yields for the main cropping season.
“Medyo nababad ang bagong tanim, kaya mababa po sigurado ang magiging ani,” they told me.
They worry though about stronger typhoons when the harvest season begins in September.
Meanwhile, the FOB price of rice from Vietnam is about US$630 per metric ton. And we get about 85-90 percent of our rice imports from this country, which also mills the palay from neighboring Cambodia.
Both Thai and Viet rice are still on the rise by the day now that India, as it did in 2008, banned rice exports to protect domestic consumer requirements and contain inflation.
DA officials told the president not to worry much, because the private rice traders were given import permits amounting to 1.9 million metric tons this year, even if NFA, or government has less than two days inventory to answer the needs of DSWD and LGUs during the lean months.
But let’s be realistic.
The private sector may hold 1.9 million tons in permits, but have they actually imported 1.9 tons, and have these arrived?
Without NFA’s visitorial powers, how do we check permits versus actual arrivals?
The importers may have been caught unaware by the sudden price increase, and while they have license to import given by the Bureau of Plant Industry, they may have recoiled from the prices, or their sellers in Vietnam and Thailand have upped their export price beyond the Philippine importers reach.
This is one of the effects of the RTL which castrated the NFA.
The privates completely dominate the rice market, and they will not buy high and sell low, which government is forced to do to ensure availability of the staple at affordable prices.
In the last summer crop harvest, NFA could not compete with the private sector, with its buying price of 19 pesos per kilo of palay thwarted by traders who offered P23 up to P28 per kilo, depending on dryness and quality.
Now DA appeals to the private sector to “cooperate” and tame down their prices.
But P23 for palay translates to P46 per kilo of rice in the wet markets.
So that explains why prices have moved up by 10-15 percent minimum.
That has yet to be captured by our PSA July inflation report. Wait for the food price indicia come August, to be reported in the first week of September.
Now let’s go into a bit of history.
In 1995, a mid-term election year, when Pres. FVR fielded a coalition ticket of his Lakas and his co-opted LDP, the DA kept insisting we had enough rice, while NFA was reporting otherwise.
FVR’s economic managers believed DA, and resisted importing rice, even if NFA still had the rice importation monopoly, now erased by the rice tarrification law effected in 2019.
After the elections in May, came July and the NFA was proven right.
Because we failed to import on time, we had a shortage, with prices shooting up, and poor Metro Manilans had to queue for their rice.
DA’s Roberto Sebastian resigned, along with NFA’s Romeo David.
FVR replaced them with the come-backing Salvador Escudero for DA and Joemari Gerochi for the NFA.
Prices began to normalize only after NFA imported the staple, which came in only in October, along with the wet season domestic crop.
Then there was 2008. Again, history is repeating itself these days.
India banned exports for the same reason as now, to ensure availability for the local demand.
The international rice market panicked, and the private traders kept buying from all sources, with Thailand and Vietnam and the other big exporters hiking their prices.
DA under Art Yap and NFA under Jessup Navarro were confronted by a shortage in NCR and other urban capitals, with angry consumers lining up for their daily rice consumption.
The current DA spokesperson was then the NFA spokesperson.
Only after Japan and Vietnam released part of their rice reserves to a pleading Philippines did the situation ease up. Credit Pres. GMA’s appeal to our friends, but at tremendous cost.
We were buying at prices shooting up to a thousand US dollars per metric ton.
That means P2,500 per sack, net of logistics, or P50 per kilo, while NFA was selling at highly subsidized rates of P23 per kilo, P16.50 even to PGMA’s favored bishops to sell in their dioceses at P18 per kilo.
The long and short of it is that DA is in charge of ensuring good production, while NFA used to be in charge of affordable distribution.
With the RTL passed by Congress in 2018 effective 2019, “affordable” distribution is left in the hands of the private sector.
NFA these days is nothing more than a public warehouse, “bodega ng bayan.” for use during emergencies such as typhoons, which are expected to be stronger in the coming months.
That is why our economic managers are hoping the private sector, which holds almost all of the nation’s rice stock, will “cooperate.”
But that is not in the nature of the beast, er, the private rice traders.
They are in the business of making profits, and when the opportunity presents itself, they act according to their best profit instincts.
As a side benefit, farmers are happy because farm-gate prices are higher, yet they keep praying the rain and wind with the floods they bring will not destroy their crop come September-October.
Logistics is also much higher these days, again no thanks to Saudi, the OPEC nations, and Russia.
So whether we talk of inbound shipping costs or domestic transport, moving rice, or flour, or corn, and everything else is up these days.
Soon, bakers will be forced to make their pan de sal as big as puto Calasiao and their “Pinoy tasty” or what the Bisaya call “American bread” sliced thinner than the present.
Even the farmer representatives are worried.
Where before they always cried out against importation, now they are saying we should have imported early enough.
Tomorrow meanwhile, the price of diesel, which went up last week by P3, will go up again by more than P3 per liter at the pumps.
Remember, headline inflation was going down the past three months.
Now it is going up, and how!
So, thanks for the good news about inflation going down last month because of lower food and fuel prices.
But as television anchors asked, “naramdaman ba sa palengke?”
And because we never learn the lessons of recent history (1995 and 2008), and our president cum agriculture secretary is yet hoping for the best, there is no more time to import enough to tame the market.
While I keep writing about my worries, I keep hoping I am wrong.