Rice prices are projected to start declining in October as a result of government’s decision to reduce import tariffs, according to Secretary Francisco Tiu Laurel Jr. of the Department of Agriculture (DA).
But Tiu Laurel said the full impact of the tariff cut may only be felt in January.
The recently signed Executive Order (EO) 62 reduces the tariff on rice to 15 percent from 35 percent effective July 8. The move aims to lower the cost of rice, the country’s main food staple that has significantly contributed to high inflation rates due to its substantial weight in the consumer price basket.
Economic managers estimate the tariff reduction could lead to a decrease of around P5 to P7 per kilogram (kg) of rice.
“Since demand for food usually spikes in December, we anticipate seeing a more substantial drop in rice prices by January,” Tiu Laurel said in a statement yesterday.
The DA said the expected decline in rice prices has not yet fully materialized because traders ramped up rice imports in anticipation of a supply shortage caused by El Niño.
The agency said between December 2023 and May 2024, rice importation averaged 422,000 metric tons (MT) per month, exceeding consumption by 102,000 MT per month which resulted in an excess of approximately 612,000 MT of imported rice at the higher 35 percent tariff, enough to cover nearly two months of consumption.
The DA said ahead of the tariff reduction, rice imports decreased to around 176,000 MT per month in June and July.
“It wasn’t until August that we saw a significant increase in import volumes to 385,000 MT,” Tiu Laurel said.
In addition to high import tariffs, the DA also said soaring global price of rice forced traders to purchase palay from local farmers at elevated prices of up to P30 per kg.
The agency acknowledged current local palay prices that now range between P23 and P25 per kg could pull down retail prices of rice.
It added freight costs have also begun to decline this month after rising by as much as $30 per MT in June and July.
“Given the wet season, some areas are seeing palay being bought at P16 to P17 per kg. We need to monitor this closely to ensure farmers are not shortchanged,” Tiu Laurel said.
The Federation of Free Farmers (FFF) said palay prices have started plummeting in several areas as farmers start harvesting their main crop.
FFF said in a statement the price decline can be attributed to the rainy weather and an anticipated supply glut during the peak harvest months of October and November.
FFF cited reports from Nueva Ecija, Pangasinan, Mindoro Occidental, Sultan Kudarat and North Cotabato where reported palay prices are falling between P21 and 23 per kg and as low as P16.50 per kg in some parts of Nueva Ecija.
“Traders are afraid the fresh harvests will coincide with the arrival of cheap imports, resulting in oversupply. So, they play safe by buying low from farmers,” said Raul Montemayor, FFF national manager, in a statement on Tuesday.
FFF also expressed alarm the National Food Authority (NFA) may not be able to intervene in case farmgate prices drop further as its funds were depleted by heavy procurement during the previous season when it raised its buying price to P29 per kg.
The group added almost 95 percent of farmers cannot meet the NFA’s quality specifications due to the lack of drying and other post-harvest facilities.
Montemayor said the problem have also been amplified by EO 62 as the policy only resulted in a mere average reduction of P0.40 per kg or by only 0.5 percent since its implementation, compared to the promised drop of up to P7 per kg.
“It does not make sense for traders to hold on to cheap stocks imported with 15 percent tariff
while retail prices are still high. They are in fact, maximizing their profits now instead of passing on their tariff savings to consumers,” said Montemayor.
Citing import data from the Bureau of Customs, FFF also said the declared cost of imported rice with 5 percent brokens, inclusive of the 15 percent tariff in July and August 2024 was only P34 per kg.
But retail prices of equivalent rice grades in the local market averaged P55 per kg, indicating a P20 per kg profit margin for traders.
FFF said the government may have lost around P3.4 billion in customs duties from 581,000 tons of dutiable imports that entered the country in July and August as a result of the reduction in rice tariffs from 35 percent to 15 percent.
Based on data from the Bureau of Plant Industry, as of September 12, 2024, as much as 3.01 million MT of imported rice have arrived in the country.
From the said volume, bulk of rice imports at 2.36 million MT or 78 percent of the total were from Vietnam.
DA’s monitoring of public markets in the National Capital Region showed the price as of last Monday of local well-milled rice was between P47 and P55 per kg and regular milled, P45 to P51 per kg.
The price of imported well milled rice is at P45 to P55 per kg, while the price range of imported regular milled rice is at P42 per kg.
Imported rice ranges from P55 to P65 for the special variety and P54 to P60 for premium.
For local rice, the special variety costs P57 to P65 per kg and premium, P50 to P58 per kg.
