"The idea of a rice supply and price crisis in our poor country is quite worrisome."
"The idea of a rice supply and price crisis in our poor country is quite worrisome."
About a month ago, I read in a business paper that the tender for 300,000 metric tons of rice done through a government-to-government purchase was put on hold, after winners had been announced.
For the first instance in as long a time as I could recall, even Myanmar participated, and won, a portion of our staple reserve requirement. The bidding was conducted by the Philippine International Trading Corporation (PITC), an agency attached to the Department of Trade and Industry.
Earlier, the Department of Agriculture certified to the need for importing a food security reserve of 300,000 metric tons of rice, and since the Rice Tariffication Law which was passed in 2019 removed that function from the National Food Authority along with its commercial functions, the G2G mode of procurement was passed on to the PITC.
The NFA can only procure palay from local farmers, have it milled, and keep the same for rice reserves to be used in times of emergency, with its buyers being the DSWD, local government units, and other government agencies for relief purposes. Of course, the implementing rules and regulations allowed for a phase-out of the commercial functions of the food security agency. By now, NFA’s 2018-2019 imports must have been sold out. What NFA holds in its warehouses by this time should either be rice milled from the palay it bought over the last 15 or so months, or yet in palay form.
There was an unexpected heavy buying from NFA due to the Covid lockdowns, when both the national and local government units had to deliver food supplies to the quarantined population.
With its 2019 and 2020 funds limited by the budget subsidy under the GAA, although augmented in the Bayanihan emergency legislation, NFA could only procure so much. And at its procurement price of 19 pesos per kilo, already adjusted from the previous 17 per kilo of palay, NFA had to compete with the private millers and traders who, surprisingly (because government statistics claim we had plenty of stocks imported by the privates in 2019 and the first quarter of 2020), were offering higher prices for palay.
I read somewhere online that NFA management proposed to hike their buying price to P21, but the NFA Council did not approve.
Why would the private traders buy the summer crop at higher prices, averaging P22 to P23 per kilo, if they had so much unsold inventory from the massive quantitative restriction-freed imports right after the NFA monopoly was lifted?
The higher farm-gate prices somehow compensated our palay farmers from the massive losses of the previous year when their main harvest was sold so low due to the immediate impact of the RT Law, which is a good thing.
Still, we are basically not self-sufficient in our rice consumption needs, and the Covid pandemic resulted in a distorted supply-demand situation. Though rice has inelastic demand, the unusual circumstances of the lockdown and its impact on people’s daily lives must have increased overall consumption. Which is why the DA’s proposal to import a modest 300,000 metric tons, about a nine-day national consumption requirement, was conservatively proper.
There were some worries when Vietnam, our main supplier of rice imports, announced that they would stop exporting to ensure their food security needs amid the Covid pandemic. But later, the Vietnamese prime minister assured our President that they would be ready to supply the Philippines.
So the PITC went into a country bidding process. But after announcing the winners, the agency announced that it was suspending awards because of a lack of certification of funds availability. NFA, when it was doing the importation of rice, could avail itself of supplier credits which the seller country could re-finance through a consortium of banks. In my time, we could get 270-day credit for instance, from Vietnam.
We of course understand that the Covid pandemic has drained the national treasury, and revenue collections have gone down. But food security is a matter of national security as well, and I thought that funds would soon be made available to honor the bids already tendered and won.
The other day, I found out that the whole procedure was cancelled. So now, we are totally reliant on the private millers and traders, with our public warehouse, the NFA, having an inventory equivalent to around seven days nationwide consumption.
Now, that is worrisome. Not only because we went into government-to-government tenders and then welched. More so because we may be entering the second half of the year with world supply precarious.
China, the world’s top rice producer followed by India, is experiencing the worst flooding in its Yangtze River Basin since 1998. With the rains still pouring from the heavens, the floods may worsen. Chongqing, Jiangxi, Hubei (birthplace of the novel coronavirus), Jiangsu, Anhui, Hunan, and Zhejiang provinces are gravely affected. Almost half of China’s annual rice production of some 205 million metric tons come from these provinces.
The Three Gorges Dam has released so much water to protect it from bursting as the water levels from the Yangtze swell with more and more rainfall (they call it the “plum rain”).
Now China cannot and will not allow its food security imperiled by low domestic production, and so it will import from other countries as necessary to feed its huge population. Though figures are hard to come by in this era of the greatest pandemic of our lifetime, the whole world’s production and consumption patterns may also have been affected.
India now has more than a million Covid cases. The ability of India to export rice may be compromised. And every other rice-eating country will then be scrambling for supplies from the top Asean exporters — Vietnam, Thailand even Myanmar to a lesser extent, just as we enter the typhoon season when shipping and logistics management are difficult and our main crop won’t be harvested until mid-September.
Then if La Nina gets naughty when our main palay crop is about to be harvested, then we will have a major crisis. And NFA is a castrated agency reduced to being a public warehouse.
The Rice Tariffication Law was in principle correct because government cannot forever subsidize, and government monopolies create price distortions. But it was hastily done in reaction to an inflationary spiral in 2018 that was caused by mismanagement of supply by previously appointed officials, now thankfully replaced by more competent persons.
These more competent persons assure us that we have 89 days supply as we entered the lean months. That is comforting. But 92 percent of these, again if the estimates are correct, are in private hands.
Look at the dangers of world supply, and sharpen your pencils, please.
In a world discombobulated by disease, having a rice supply and price crisis in our poor country is quite worrisome. I hope my fears are unfounded.
