A big welcome to the new Secretary of Agriculture, and good luck. He arrived just in time to deal with a crisis that is threatening to get even worse. While Francisco Tiu Laurel Jr. is a fisheries man, his big problem will be rice causing a fall if the response falls short.
The claim of our government that there is a bumper rice crop harvest had better be true or we are royally screwed. Unfortunately, fertilizer sales are down, so how can we have a bumper crop?
Indeed, a knowledgeable source sent me this message: “Recent run-up of palay (unhusked rice) prices in Intercity (our main bellwether for rice prices) to P29/kg may indicate historical high, which is happening ironically during a wet season (normally prices are higher in dry season).
“Harvest is not even over yet, but rice millers in Intercity and Golden City are already worried. Many of them may stop milling when palay prices breach P30/kg because resulting rice prices are just too expensive to trade; threat of getting accused of hoarding and profiteering, and there are no palay stocks to buy anyway.
“Rice millers all over the country are puzzled by official reports that we are having a bumper crop.”
Experts have declared 2023-2024 an El Niño year. According to the ISEAS–Yusof Ishak Institute, a research institution of the Singaporean government, the last two “very strong” El Niño events – in 1997-1998 and 2015-2016 – caused a notable decline in rice production. This contributed to global inflation in the price of rice.
Last week, the cheapest rice I could find in a grocery at Eastwood City was at P67/kg. I was not surprised. Even while the President’s rice cap was in effect, retailers were only selling higher priced rice varieties not covered by the order. When the cap was lifted, rice prices were up for all varieties.
The farmgate buying price of dry palay is as high as P29/kg in some areas. Since it takes two kg of palay to produce one kg of milled rice, the minimum price is P58/kg, plus logistics costs and trader profits easily brings it up to over P60/kg.
Unfortunately, it is just the traders who are making money. The traders set the high farmgate buying price to leave the NFA behind. NFA buys fresh or wet palay at P16 to P19/kg vs P21 to P23/kg by traders.
The farmers do not benefit from the high buying price. Most are heavily indebted to traders. And traders deduct their debt at the rate of five bags of palay per P2000 loan. The buying price becomes irrelevant to the heavily indebted farmers. Only those with little or no debt benefit somewhat from the high buying price of palay.
The good news is, NFA does not have enough rice to sell at P20/kg at a huge loss for taxpayers. But the DA has to stop telling the President and the media that we have enough buffer stock, only to find out we don’t once El Niño strikes hardest next year.
The private rice importers, who cancelled their orders from their Vietnamese suppliers when the price cap was instituted, have started importing heavily again. That’s good news because that beefs up in-country stock. Traders will be able to make rice available, but the price may be beyond what our people can afford.
Customs reported collecting P16.81 billion from rice tariffs from January to August, up six percent year-on-year. This, despite eight-month import volume falling 15 percent compared with a year ago to 2.257 million metric tons, as prices of the staple rose and local importers curtailed or stopped importing.
The government forecasts rice imports to hit 3.1 million this year, which if realized, will be lower than the 3.8 million MT that arrived in 2022. From January to October, the country has imported 2.8 million MT of rice to bridge supply gaps.
For now, my sources tell me there is enough imported rice in the market, but it is expensive at P2,500 per sack even if the Vietnamese rice imported here are of lower quality. By comparison, current wholesale prices for domestic rice are at P2,100 to P2,200 per 50 kg sack. But because the harvest has not been good overall, my source tells me domestic rice could go up to P2,700 by next month. There may also not be enough imported rice soon because a global shortage could set in, as exporters like India are restricting exports.
This is why if there are really rice smugglers, as the government claims, that may be good in terms of adding more in-country stock even if Customs loses out on duties. Afterall, there was a proposal to suspend tariffs on rice imports to help importers bridge the gap between higher import prices and local prices. The smugglers act in self-interest, so they are probably seeing a serious supply gap they can profitably fill. Record high world prices are recoverable because smugglers don’t pay tariffs and our local prices are starting to significantly increase.
ISEAS fears that with this year’s record-breaking ocean temperatures, it is almost certain El Niño could be “very strong” towards the end of the year. Analysts are predicting a shortfall in rice production; one foretelling the worst shortfall in 20 years, surpassing the shortfall in 2015-2016. El Niño’s impact has been proven to persist beyond the El Niño year, and ISEAS has advised authorities and communities to prepare for a prolonged recovery.
The last El Niño event, 2015-2016, recorded the hottest year on record and affected 60 million people globally; in Southeast Asia, the warmer temperatures and prolonged drought resulted in an output decline of 15 million tons of rice compared to the preceding two years.
A shortfall will make rice exporting countries, like Vietnam and Thailand, prioritize domestic consumption. With less rice available for export, all major rice importers like Indonesia, the Philippines, Malaysia, and Singapore will be drastically affected if their buffer stock is inadequate.
The rice crisis is starting to cause a fall in the President’s popularity rating. False claims today that we’re ok may come back to bite the President if the reverse proves true. Tell the people there is a problem and let us work together.
Boo Chanco’s email address is bchanco@gmail.com. Follow him on X or Twitter @boochanco