To import or not to import – the rice dilemma

By V.L. Domingo

V.L. Domingo

There is now a great debate on whether to import or not to import rice for at least the 30-day-buffer stocks needed by the National Food
Administration (NFA) which is mandated to insure food security.

Secretary of Agriculture Manny Piñol says that we should not import because there is no report yet of losing the standing crops either
by calamity or pest and disease that warrants the importation. Besides it is the policy of the state not to import rice during the harvest
season to check the alleged connivance of NFA with trader millers.

This is also to counter the manipulatons by some unscrupulous importers/smugglers who have already imported the stocks that are just
waiting in the warehouses of the export processing zones ready to be shipped to Manila NFA warehouses.

This will now allow NFA to dispose ot its old stocks as damaged stocks at give-away prices to traders who will then mix it with the new
harvest that they may have purchased. This will then stop buying, thus making the palay very cheap for them to continue buying and
stockpile it for the lean months and make a profit killing.

But statistics, long hidden from the public, show the opposite, that in the next five years, the state must instead assist more the farmers
to produce more to be harvested during the lean months instead of importing now.

NFA Administrator Jason Laureano Y. Aquino who was nearly ousted by Cabinet Secretary Leoncio Evasco Jr. who chairs the NFA
along with PCA, etc., is not amenable to importing now to protect the price of the farmers at harvest time.

This is now a case of whether to import or not.

The production arm of the government is now separated from the importing arm, thus making it a case of the left hand not knowing
what the right hand should do.

Importing rice now (which might NOT be the right time) is also in compliance with the WTO commitment to allow other countries to
export to the Philippines on the basis of a Minimum Access Volume (MAV) that is now open because the QR (Quantitative Restriction)
has been lifted. This means that it is now a free-for-all for other countries to export rice to the Philippines, which will now definitely
dampen the price of palay for our farmers.

NFA is now in a dilemma because the government support price of palay peg at P17 per kg for many years can no longer compete with
the traders who now buy at P18 per kg or even higher, depending on their stocks, then hoard the palay for better prices in the coming
lean months. NFA will not be able to stabilize prices.

Our farmers are often left in the cold, their livelihood and destiny left in the hands of traders who often exploit them. For many years,
traders have been in connivance with NFA that has an overstock because of importation and sells at half the import price to favored
traders. This stops buying from the farmers who now have to sell at below their breakeven cost with the high cost of imported fertilizers
and chemicals.

This is why the farmer remains indebted and gets poorer every year since the People Power Revolution.

To take advantage of the conflict among the personalities in the government, the Kapisanan ng Magsasaka, Mangingisda at Manggagawa
ng Pilipinas Inc. (KAMMMPI) offered to the government a Standing Crop Buffer Stocking Systems (SCBSS) from its members who
will plant rice now to be harvested during the lean months for the National Food Authority.

KAMMMPI said that to solve the impasse among the trusted lieutenants of President Duterte, it’s about time that his administration
looks at the farmers as a source of a buffer stock based on a P18 per kg forward buying for farmers

to be encouraged to plant for SCBSS. NFA only needs to provide a PO to KAMMMPI at P18 per kg. which has an existing PO financing
arrangements with the banks and its members can be clustered into 1,000 hectares per province and produce the buffer stocks.

Under the present production yield of farmers, they can hardly break even even at P18 per kg. farm-gate pricing as against the
government price support of P17 per kg, skin dried.

This issue can be remedied by its proposed GET SMART Farms (Green Energy Technology with Systematic, Modernized Appropriate
Rural Technologies for Farmers Sustainability) where small holder rain-fed farmers will be irrigated with “electrigation” (electric water
pumps). This can be set up in just three days to provide irrigation to one hectare, clustered into 1,000 hectares in at least 4-5 barangays
to plant and harvest every day.

At present, the effective cost of the government to irrigate one hectare even in Communal Irrigation System is P1 million per hectare.
KAMMMPI offers to do it for half the price, using its seed funds for irrigation as a private irrigation contractor of the Office of the
President Peoples Survival Funds (but only to be monitored by NIA) but with ownership to the farmers corporations that will be
organized for this purpose in partnership with a local cooperative accredited by KAMMMPI to supply NFA.

KAMMMPI said, that in addition to the “electrigation” the P500,000-per-hectare budget will also buy tractors, transplanters and rice
mill to plant, harvest and process a minimum of 60 tons of harvest per day in the GET SMART Farms.

The farmers’ federation added that if the government is interested in this approach which is an Agribusiness Systems Approach, it can
immediately provide a seed fund to its GET SMART Farm and sign a contract for the supply of a buffer stock for NFA that will be made
available in the next four months on a daily basis with a standing crop buffer stock.

KAMMMPI will then partner with existing Agrarian Reform Communities to train farmers into commercial and mechanized farming
and become SMART FARMERS. It will now free the farm workers, especially women from back-breaking hand transplanting and
encourage the farm youth to go back into farming.

Its socio-economic impact will redound to the development of the rural economy, protect and preserve watersheds (by the farmers), and
bring political awareness of good governance by the Duterte administration.

Contrary to the administration’s action plan and recommendations from economists, industry group Samahang Industriya ng Agrikultura
(Sinag) wants the country to reach its decade-old dream of rice self-sufficiency and stop relying on imports.
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The group maintained that if the government would subsidize rice farmers in the production to marketing stage, raise the National Food
Authority’s (NFA) farmgate support price for palay and incentivize local rice millers to modernize operations, producing our own staple
would be more beneficial for the country in the long run.
It cited data from the latest report of the United States Department of Agriculture where it noted that less than 10 percent of global rice
production was tradeable, with 66 percent already allotted to China.
“Shortage may happen with limited supply of rice going around the market,” the group said. “The greatest tragedy of our times is the
destruction of our capacity to produce our own staples.”
Food security
But for former Economic Planning Secretary Cielito Habito, food security does not equate to rice self-sufficiency.
“The most unfortunate irony of all is that under current circumstances, the more we pursue 100-percent rice self-sufficiency, the more
we make most Filipinos food-insecure. Food security and food self-sufficiency are two different things. Food security denotes reliable
access to adequate, affordable, safe and nutritious food. Our self-sufficiency policy has had the perhaps unwitting effect of making rice
much more expensive to Filipino consumers than it needs to be, with the Filipino poor suffering the most,” he said.

Habito emphasized the need for the present administration to help farmers diversify their produce accordingly by choosing crops that
are more suitable to their lands, and stop chasing the elusive goal of rice self-sufficiency, which, over the years, has been proven to be
unsuccessful despite numerous government interventions.
Historically, rice has taken the lion’s share of the agriculture budget. For 2018, the agency will continue advocating the use of hybrid
rice seeds, and loan and insurance programs are expected to cater mostly to rice crops.
“Our marginal rice farmers should be assisted to shift to other more remunerative crops suitable for their lands. Meanwhile, utmost
productivity support must be given to our rice lands that are inherently competitive in rice, including in Central Luzon and Western
Visayas,” said Habito.
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Economist and Ateneo professor Leonardo Lanzona Jr. agreed, emphasizing that the country must now move away from prioritizing the
production of the staple.
“It would be better to use funds that we have for producing high-value crops or improving technology. Ever if we move some of the rice
producers to planting high-value crops, our growth would continue to increase. But, of course, we need to have some agricultural
development program,” he said.
“Lifting the QR will benefit the public in general, but there should be a social protection for farmers. Subsidize to a limited extent, but
what is more important is to give them incentives to look for other options,” he added.
Lanzona said that the shift to other crops from rice would not mean neglecting the agriculture sector. For him, the farm sector must be
developed toward a direction where the Philippines might have a comparative advantage against other countries. “Right now, we don’t
have a comparative advantage on rice anymore.”
Both economists said they believed that food security should be best pursued at the regional level, and this is where Asean plays a crucial
role.
“Asean as a region is not only self-sufficient in rice, it produces a surplus and can continue doing so for a time,” Habito said. “Food
security can be achieved through a stronger regional buffer stock where the rice-surplus countries can fill the deficits of the rest. That
way, rice could be cheaper for all, and Asean peoples, particularly in the rice-deficit countries, would generally be much more food-
secure. This is what the Asean Economic Community should be about.”
At present, a food security scheme has been established among members of Asean along with China, Japan and Korea in 2016, creating
an emergency rice reserve for the region called APTERR or Asean Plus Three Emergency Rice Reserve.
The program provides an exclusive market for the countries to buy rice from in case of natural calamities or emergencies, without
distorting the international rice market.
Currently, the total earmarked emergency rice reserve pledged by APTERR member-countries is placed at 787,000 MT. According to
the NFA, the Philippines has been benefiting from APTERR since 2010. In the wake of Typhoons Ondoy and Juan and the occurrence
of La Niña and flash floods in the country, Thailand donated 520 MT of rice to the country through APTERR.
“Since 2012, at least 7,200 MT of rice had been donated through the program to the Philippines for the victims of Typhoons Pablo,
Yolanda and Nona,” the NFA said.
With the nearing influx of imported rice, policymakers must make sure that the country’s rice requirement is met by all means. At the
same time, local farmers should be well-equipped to survive the evolving market.
Right now, the challenge is to make sure that rice farmers can compete at a price 35-percent higher than imported rice, and give
consumers the option to avail themselves of the staple at a more affordable price.

Read more: https://business.inquirer.net/245204/debate-rice-strategy-continues#ixzz60XnInscK

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As of August 2016, Filipinos are paying more than twice for a kilo of rice compared to their Thai and Vietnamese counterparts

JC Punongbayan
Published 11:00 AM, September 24, 2016

Updated 10:52 AM, October 01, 2016

Although national attention is currently focused on the war on drugs, the Duterte administration is quietly making gains in another policy
area – rice policy.

Recently the Duterte Cabinet, led by its economic team, agreed to lift restrictions on the importation of rice by 2017. This would usher
in greater volumes of rice imports that the government has been trying to put off for more than two decades now.

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On the one hand, local rice farmers are naturally worried. They say that this policy will hurt them in the same way that other farmers
have been hurt by the influx of cheap imported agricultural goods (like onions).

On the other hand, some say that this policy will help promote competition, lower prices, and benefit several millions of Filipino rice
consumers.

Some groups are already hailing the Cabinet’s rice policy as one of its first major economic reforms. To appreciate how exactly this
policy can benefit the country in general, it may help to step back and look at key facts about rice consumption and production in the
Philippines.
How affordable is rice in the PH?

Figure 1 shows that the Philippines has always had some of the highest rice prices in Southeast Asia. As of August 2016, Filipinos are
paying more than twice for a kilo of rice compared to their Thai and Vietnamese counterparts.

Figure 1. Source: FAO (Food Price Monitoring and Analysis Tool). Period covered: January 2000 to August 2016. PH data refer to
regular-milled rice; Thai and Vietnamese data refer to the 25% broken variety.

These high rice prices harm poor Filipino households more than anyone else. Based on recent data, while the poorest households spend
around 20% of their income on rice alone, the richest households spend just under 5% (Figure 2).

Rice prices are harmful not only when they are high, but also when they are volatile. Figure 3 shows that since 1991 we experienced
three major spikes in rice prices: 1995 (a 45% increase in price prices), 2008 (60% increase), and 2014 (20% increase).
Figure 3. Period covered: January 1990 to July 2016. Trend displays growth in the price of regular-milled rice, which mimics the trend
for other types of rice.

Such significant jumps in rice prices can have devastating impacts on the poor. A 2015 study found that at the height of the 2008 rice
crisis, the inflation rate faced by the poorest 30% of the population was about twice the inflation rate faced by the general population.
This significantly eroded the purchasing power of the poor and led more households into hunger and poverty.

Some studies also show that poor rice farmers are, in fact, net consumers (rather than net producers) of rice, meaning that they consume
more rice than they produce. Hence, poor farmers are hurt by high rice prices as well.

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What makes rice extra expensive for Filipinos?

High and volatile rice prices in the Philippines are borne by a myriad of factors, but largely geography and policy.

On the one hand, the Philippines has a relative disadvantage when it comes to rice production because of our archipelagic geography.
Unlike Vietnam and Thailand, we do not enjoy as much vast, uninterrupted rice plains and access to natural irrigation at the scale of,
say, the mighty Mekong River.
On the other hand, expensive rice is also due to government policies, particularly the National Food Authority’s (NFA) status as the sole
importer of rice in the country.

Every year the NFA decides how much rice to import based on forecasts of domestic rice demand and supply. This heavy-handed
tinkering with the market, however, can occasionally lead to disaster when planning becomes faulty.

Specifically, the NFA may at times fail to import sufficient quantities of rice, leading not only in smuggling (which is really a
manifestation of a large unmet demand for rice) but also in catastrophic shortages and price spikes.

Our last two rice crises attest to this. In 1995 and 2008, erroneous supply forecasts, external factors, and badly-timed imports led to
massive rationing and queues. These were relieved only through belated importation of massive amounts of rice.

In the aftermath of these events, a select number of private agents have been allowed to import rice, but with a collective limit of 805,000
metric tons per year and levied with 35% tariff rates.

It is these import restrictions that the Duterte Cabinet is seeking to abolish by next year. By allowing more private agents to import rice,
the NFA need not second-guess domestic demand and supply conditions, thus avoiding over- or under-importation of rice in any given
year.

More importantly, this policy also means more competition in the domestic market that could lead to lower and less volatile prices, as
well as food security for the vast majority of Filipinos.

This is not to say, however, that the NFA no longer has any significant role to play. For instance, it could focus on maintaining a buffer
stock of rice to prepare for emergency shortfalls and provide immediate relief to avoid events like the violent Kidapawan protests last
March. The NFA could also maintain a small tariff from which it can earn revenues to support farmers adjusting to this new era of freer
rice trade.

Conclusion: Good rice policy as a low-hanging fruit

The Duterte Cabinet’s proposal to lift rice import restrictions promises to benefit millions of Filipino rice consumers, especially the
poor.

However, rice producers have already protested the Cabinet’s recent pronouncements. There are even renewed calls to reestablish the
NFA’s status as the sole importer of rice. Hence, the Duterte Cabinet’s success in bringing rice policy reforms is yet to be ensured.

Such policy could arguably enjoy more success if it found support in the President himself. After all, there are about 101 million rice
consumers in the country. In contrast, there are just 1.8 million drug users in the country as of 2015. Hence, shifting even a bit of
attention away from drug policy and into rice policy can potentially benefit a far greater number of Filipinos.

Of course, it seems that the current drug war is here to stay. But given the potential benefits, here’s hoping that the present leadership
brings at least as much interest and enthusiasm into rice policy. In the vast tree of social policies, this could very well be one of the
lowest-hanging fruits out there. – Rappler.com