“You would think that armed with a huge electoral mandate, our president should be doing the right policies and programs despite immediate unpopularity, and stake his political will on long-term and long-needed reforms”
Weeks ago, the president made a show of launching Kadiwa stores where 25 pesos per kilo of rice was made available to the public.
It was good optics for the day, made with a promise that his campaign pledge of 20-peso rice per kilo was truly achievable.
But it did not make any sense from the vantage point of good economics. And it cannot be sustained.
And if the government has plans of sustaining the same against all good sense, it will cause a hemorrhage in public funds, funds which come from the taxpayers of this country.
95 percent or more of this country’s households cannot line up in select Kadiwa stores to get a kilo of rice, along with an even more limited supply of 70 pesos per kilo of sugar.
Former DA undersecretary Fermin Adriano did the math, which anyone from farmer to miller to trader to retailer knows by heart.
A kilo of harvested palay loses weight (reseco) after drying, and for well-milled rice, that kilo of palay translates into 0.650 grams of rice, sometimes lower depending on the milling process.
Then you add the cost of storage, packaging, transport, all the way to the retailer (in which supply chain more loss of weight occurs), and so the industry computes the retail price of rice as two times the cost of palay.
The National Food Authority, which, after the Rice Tarrification Law, is no longer allowed to sell to retailers, no longer allowed to import rice, and is virtually just a public warehouse for emergency reserves, currently buys dried palay at 19 pesos per kilo.
Using the rule of thumb, the retail price of such, assuming the NFA could yet sell commercially, should be 38 pesos per kilo of rice.
Farmers cry that when private traders buy their palay, they get as low as 10 pesos per kilo ex-farm, or a high of 16 pesos for dried palay these days, depending also on the distance from farm to the miller.
Yet even before fertilizer zoomed three times up, the cost of production was around 13 pesos per kilo. In effect, at the current buying price by private traders, farmers are losing their shirts, and their future as well.
The revived Kadiwa stores, a relic from the days of the president’s father which lost a huge sum of money for government, is now supplied by NFA from its reserves.
So assuming NFA bought palay at 19 pesos, the retail price ought to be 38 per kilo of rice. At 25 pesos per kilo from the few Kadiwa stores, government loses 13 pesos per kilo.
How in heaven’s name can we sustain that?
When I took over the NFA in July of 2010, the agency was saddled with a 178 billion peso debt, well over the 150 billion ceiling that our economic managers prescribed in the GMA government.
We were swimming in rice, because the previous dispensation imported some 2.25 million tons of rice in 2010, up from 2.1 million in 2009. We had to rent an additional 420 warehouses over and above our 370 NFA-owned warehouses just to store the stockpile.
An audit ordered by Pres. Aquino concluded that the GMA government bought the rice exclusively from Vietnam at atrociously high prices which I will no longer detail here.
Suffice it to say that since the price and supply of rice is a political issue, the previous dispensation, which in 2008 suffered from a price and supply crisis which shocked the global grains market, may have over-reacted by over-stocking on imported rice.
I will repeat that: imported, not domestically farmed rice.
NFA was selling rice to NFA-accredited outlets at 23.50 per kilo, and they sell to the public at 25.
By a special arrangement with select Catholic parishes, GMA directed NFA to sell at 18 pesos (remember the Pajero bishops?) per kilo. As I said, in this country, politics often trumps economic sense.
So, the NFA Council in my time approved an increase in the retail price to 27 pesos per kilo, marginally up from 25, in an announcement I timed during the feel good Christmas holidays of 2010 so people would not feel the pinch as much.
We intended to increase the release price a year after to 27, with a retail price of 30 per kilo.
But a strong typhoon in 2011 just as the grains were to be harvested flattened Central Luzon, and it was inappropriate to increase rice from 27 to 30 per kilo.
Then, we cut down government importation to a mere 200,000 kilos for buffer stock purposes, down from 2.25 million the previous year, and allowed the private sector to bid for their import licenses, earning billions for government, for a total of 660,000 tons.
The idea was to gradually wean away NFA from importation, and give the same to the private sector, just as our quantitative restrictions per World Trade Organization agreement were due to expire.
We then approached our lenders, from DBP to LandBank, to BdO and foreign banks such as ANZ, Bangkok Bank PCL, Mizuho, to restructure our short-term loans into medium-term and renegotiated the rates, which with the goodwill of the newly-elected Aquino government, were approved.
The net result was to reduce in a year and a half the reduction of our bloated 178 billion-peso loan to 143 billion.
But per decision of the Department of Agriculture, we applied with the WTO for a five-year extension of our rice import quantitative restriction, the only country in the world still availing itself of such despite the free trade “bible”.
When I resigned from the agency in the last quarter of 2012, the QR issue was yet unsettled before the WTO, aside from the fact that no Rice Tarrification Law was even brought up before Congress until DOF Sec. Sonny Dominguez seized the rice crisis of 2017-18 to egg Congress on to finally pass the RTL.
The law has its good economic merits, but the implementation of the rice subsidy portion for marginal farmers is still wobbly, on top of the current international economic crisis that has impacted on fertilizer and other inputs and brought palay farming close to penury.
But that is a long, long story, spanning years of neglect, the agrarian reform redistribution of land, land conversion, irrigation problems, all of which now confront the president with overwhelming vengeance.
He is saddled with the wages of previous neglect.
Still and all, promising 20 pesos per kilo, and making a show of reviving Kadiwa with its 25-peso rice is nothing more than good optics for the moment, but against good sense.
You would think that armed with a huge electoral mandate, our president should be doing the right policies and programs despite immediate unpopularity, and stake his political will on long-term and long-needed reforms.