Rice prices rising anew despite ‘good harvest’

It’s almost June. Rice retail prices are inching up again. A repeat looms of the price surges of June 2013 and 2014. The government could be repeating past mistakes.

To recount those two consecutive years, the agriculture department had bragged of dry-season bumper harvests in March-April. Supposedly the Philippines was fast becoming self-sufficient in rice. Still there were supply shortages by June. Rates spiked 33 percent per kilo. Consumers howled. Senate inquiries ensued. Unnamed price manipulators-hoarders were blamed. Yet no one was indicted for economic sabotage.

In the Senate hearings emerged claims that protectors were abetting the crooks. Insiders said there were two factions at the National Food Authority. One was aligned with the vaunted “Goliath of Rice Smuggling.” The guy was facing lawsuits ranging from electricity theft to importing garbage, but nothing close to rice staple. The other faction was controlled by a big trader in Binondo, Manila. So sly was he that he has caused the sacking of NFA officials since 2014.

There was another bumper crop this March-April 2017. So why are prices rising?

The answer is in the supply, as usual. Domestic production has always been short. Rice farmers have been neglected for decades. They hardly receive help in the form of irrigation, fertilizers and pesticides, high-yield seedlings, post-harvest facilities, and warehousing. Bureaucrats steal the meager funds the government plunks into “agricultural competitiveness enhancement.” The NFA keeps importing rice, by itself or through selected traders, instead of letting the private sector freely do it. From private rice imports, the NFA could have earned tens of billions of pesos a year in tariffs. Add that to its P5-billion annual budget, and the NFA would have had money not only to buy local harvests but also modernize rice farming. But then, the kickbacks are in overpriced imports, selective licensing, cargo handling, sacks, and other items. The past agriculture and NFA chiefs were charged with P3.2-plunder in 2013-2014, although the Ombudsman sat on the case.

This year the NFA permitted selected traders to bring in 650,000 tons by end-February. For various reasons – suppliers’ delivery lapses, shipping delays – 150,000 tons missed the deadline. The administrator forbade them from extending till March. It was already harvest time. Any more rice imports would have dampened farm-gate prices, and farmers would lose money.

Meantime, the NFA Council ignored the administrator’s request to import by June 250,000 tons, via government-to-government deals with Thailand or Vietnam. That's only part of the NFA’s intended 1.3-million-ton import for the whole of 2017. The Council knew there could be hanky-panky in G-to-Gs. Vietnam’s counterparts of the NFA, Vinafoods-1 and -2, know only too well the “kalakaran,”or percentage, that Filipino officials expect.

With each guarding the other, the rice stocks thinned out. The safe supply level was unmet. It should have been 650,000 tons from the selected traders, but this fell short of 150,000 tons. Add to that the 1.3 million tons that NFA committed to buy within 2017, but 250,000 tons of that did not come in on time. By June there would be shortage of 400,000 tons.

The giant smuggler and rival big Binondo trader know the situation, of course. The bumper harvest was insufficient to fill domestic demand. There was a 150,000-ton shortage of private imports before March. With only 500,000 tons brought in, the importers would up their price to recover the cost of the withheld 150,000 tons. Going in their favor is the much-announced refusal of the NFA Council to allow the G-to-G of 250,000 tons.

Quietly last week, President Duterte reportedly allowed the entry of the 150,000 tons earlier debarred by the NFA administrator. The latter in turn also rushed private imports from India and Pakistan. Timely arrival and distribution of those imported stocks to the 16 NFA warehouses nationwide would somehow lessen the domestic supply shortage. But the country will enter the lean months starting late June.

Come July the country should have lifted its “qualitative restrictions” on rice. Under a commitment since 2005 to the World Trade Organization, the NFA no longer may select a few importers under the MAV (minimum access volume). Anyone may henceforth import, so long as the tariff is paid. Once pegged at 50 percent, that tariff presently is at 35 percent.

The government is caught in a bind. If it lets in a free-flow of rice imports, prices would drop from natural competition. Consumers would benefit, but farmers would go hungry – unless subsidized with the earnings from the tariffs. If the government continues to restrict imports, the WTO and agriculture importing countries may impose sanctions. They may ban or tighten through their own higher tariffs their imports of Philippine sugar, bananas, pineapples, even semiconductors and overseas Filipino workers.

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