Why is rice still expensive?

August 01, 2019

A significant drop of around P7 per kilo of our staple food was widely expected when RA 11203 or the Rice Tariff Law took effect last March 5. Yet five months after, rice consumers are hardly rejoicing from just a P1/kg to P2/kg price decrease so far.

Rice farmers are in a situation that’s far worse. Amid the deluge of imported rice in the aftermath of the new law, farmers are suffering because “farm gate prices of paddy rice dropped to a record low of P12 per kilogram (/kg) to P14/kg in many parts of the country, a steep drop from an average of P20/kg price for fresh palay earlier this year.”

And the worst is yet to come. With declining farm gate prices of palay from the average P20/kg before the new law was implemented, local rice farmers are in for staggering losses estimated at P114 billion for this year alone.

Huge profits are reportedly being raked in by rice traders and importers, with massive stocks of imported rice currently sold in the market at retail prices very much higher than the landed cost.

Imported rice entering the country, according to Bureau of Customs(BoC) data, “had landed cost of only P18.22/kg for Myanmar’s 25 percent broken rice; P25.33/kg for Vietnam’s 5 percent broken rice; P23.06/kg for Thailand’s 5 percent broken rice.”

But such stocks are being sold in the local market for as high as P70/kg, “while the average selling price is at P42 per kilo,” according to regional offices of the Department of Agriculture. The DA also revealed that “premium or 5 percent broken rice imported from Vietnam and Thailand is sold from P50/kg to P60/kg for a whooping margin of P25/kg to P35/kg.”

“Traders are so into importing right now because they feel like no one is controlling the prices, their margin of profit is too big and that is not the intent of the law,” Agriculture Secretary Manny Piñol explained. “Because of the good profit, everybody would like to import to the detriment of the Filipino farmers, no one wants to buy local anymore.”

To deal with the extensive profiteering, Piñol announced recently that government will soon impose a Suggested Retail Price (SRP) on rice. “We will now be using the Price Act as basis in addressing the uncontrollable prices in the market,” he said.

But there’s more bad news. The Federation of Free Farmers (FFF) revealed alleged undervaluation of imported rice to evade tariffs that are estimated to reach P4.24 billion so far.

The BoC has reportedly collected P5.9 billion from the importation of 1.43 million metric tons (MMT) of rice. “P5.9 billion generated from 1.43 MMT worth of imports at a P52 to the dollar exchange rate suggests a landed cost of $227 per metric ton, much lower than the estimate provided by the United Nations Food and Agriculture Organization (FAO) of $391 for the 25% broken grains variety,” an FFF statement said.

“Most of the private sector imports were for 5% broken rice which commands a higher price in the market and offers a better profit margin for traders. This type of rice should have landed at $422 per ton at the lowest, instead of just $227,” the FFF said.

Aside from lowering prices for consumers through more supply, the Rice Tariff Law was also intended to make local rice farmers “globally competitive” with a Rice Competitiveness Enhancement Fund (RCEF). P10 billion is allocated annually over a six-year period as support for farmers through rice farm machineries and equipment (50 percent), rice seed development, propagation, and promotion (30 percent), credit assistance (10 percent), and extension services (10 percent).

But with undervaluation on rice imports, the FFF warned that “tariff collections may not breach the P10 billion threshold, or the excess may be too small to provide any meaningful assistance to affected farmers.”

Unless government acts swiftly to achieve the intended benefits for rice consumers and farmers alike, great expectations from the new law might not be realized.

Email: insights.xlr8@yahoo.com