The executive order (EO) setting price caps on rice is a knee-jerk reaction that does not solve the long-drawn problems hounding the grain, according to several stakeholders
The stakeholders, led by the Foundation for Economic Freedom (FEF), are clamoring for more viable and longer term solutions, such as tariff cuts and amendments to agrarian reform.
They also noted the possible challenges in the implementation of EO 39 despite the assurance by the Department of Trade and Industry it will mobilize its price monitors and will work closely with the Department of Agriculture (DA), national agencies and local chief executives to effectively implement the mandated price caps .
EO 39 issued by Malacañang on August 31 slapped mandated price ceilings on regular milled and well-milled rice, at P41 and P45 per kilogram, respectively. The caps take effect tomorrow, September 5.
The EO aims to crack down on domestic price manipulation at a time of rising pressure from events such as the Russia-Ukraine conflict, India’s export ban, and unpredictable oil prices.
FEF in a statement over the weekend sought for the lifting or reduction of import tariffs on rice from Asean from 35 percent to 10 percent as a more effective way to bring down the price of rice.
The caps, it said, will harm Filipino consumers and farmers and the entire economy “because it will not be effective in solving the demand-supply gap and arrest increasing food price inflation.”
FEF said the caps will only aggravate the current tight rice supply situation into a full-blown rice crisis.
The price cap will harm consumers because it will drive supply away from the market, fuel a black market for rice, cause traders to cheat consumers by mixing inferior broken rice with regular and well-milled rice, and incentivize traders to hoard as the price ceiling is below their procurement and selling prices, the FEF said.
Lower-income consumers in particular will suffer when regular milled rice becomes less available in markets at a controlled price and is passed on as well-milled rice by traders, it said.
It said the EO will similarly harm farmers because traders will use the price cap to justify lowering their buying prices for palay or simply refuse to buy palay from the farmers as they will lose money due to the high farmgate price of palay.
The group said government can afford to lower rice tariffs because the mandatory P10 billion allocation for the Rice Competitiveness Enhancement Fund as stipulated by the Rice Tariffication Law has already been achieved, citing a recent report by the Bureau of Customs that said tariff revenues from rice import stands at P16.8 billion as of August 23.
“The government may restore the tariff rates back to 35 percent when the demand and supply situation stabilizes and if the onset of the harvest season results in falling rice prices,” the FEF said.
Bigger farms needed
The FEF also called on the government to amend the Comprehensive Agrarian Reform Law (CARL) to increase the farmland retention limit which is set at five hectares to an economically viable twenty-four hectares.
“Because of CARL, average farm sizes have fallen to one hectare or less,” the Foundation for Economic Freedom said.
“The country needs bigger and better-managed farms to increase agricultural productivity, thereby increasing supply and reducing food prices. Increasing domestic food production through commercial agriculture is the key to meeting the challenge of meeting the food requirements of an increasing population and solving the country’s serious malnutrition problem.”
Rosario Guzman, head of research of IBON Foundation, in a statement said without meaningful production support and crackdown on traders profit taking, the farmers will only bear the EO with much lower farm gate price than what they are already receiving.
“Invoking the Price Act is useful emergency situations. But our rice problems are long-drawn problems of neglect and trade liberalizations. The EO does not address these,” Guzman said.
Enough supply
In supporting the EO, the National Economic and Development Authority (NEDA) said the sharp increases over the past weeks of rice that are inconsistent with the apparent supply and demand situation implies that some are manipulating the expected impact of El Niño Southern Oscillation (ENSO) to depict a shortage at this time.
NEDA said the EO will have two effects: immediately reduce the price of rice and; penalize and consequently discourage hoarding, further decreasing the price of rice.
“The imposition of a price ceiling on rice is not a standalone initiative. Law enforcement authorities continue their valiant efforts to crack down on individuals who hoard, excessively profit from, smuggle, or participate in rice cartels,” NEDA said.
NEDA assured the country has enough rice supply for the third quarter.
“With the upcoming harvest season starting in September and additional import orders already secured, there will also be enough rice for the rest of the year,” NEDA said.
“We are confident that the imposition of a price ceiling is only a temporary measure. We expect the rice harvest to commence soon and anticipate that other initiatives will produce the desired result,” it added.
Assistance, crackdown
The DTI for its part said an assistance program aimed at extending support to small rice traders and retailers that will be affected by EO is in the works to keep them afloat until rice prices stabilize.
The DTI in a statement on Saturday said small traders who bought their stocks at higher prices are expected to lose money, and the government is looking at possible support that can be extended to them so they could avoid bankruptcy.
DTI Secretary Alfredo Pascual in a separate statement said the agency will perform its monitoring and enforcement functions in collaboration with the DA and other concerned agencies.
Pascual said the DTI will collaborate with the Philippine Competition Commission to undertake measures against cartels and other entities that manipulate prices, thereby ensuring the welfare and protection of consumers.
“To fortify our monitoring and enforcement mechanisms, the DTI will mobilize its price monitors and engage with LGUs to activate their Local Price Coordinating Councils,” he added.
Raul Montemayor, Federation of Free Farmers national manager, warned if traders and millers cannot sell at that price, then either they will stop selling rice or they will shift to or rebrand their rice products to grades other than regular milled rice or well-milled rice in order to evade the price cap.
Pascual said violators will be charged with illegal price manipulation and/or violation of price ceiling under the Price Ac.
Illegal price manipulation is meted with a fine of P5,000 and no higher than P2 million and imprisonment of five years and not exceeding 15 years while violation of price ceiling carries a fine of P5,000 and no more than P1 million and imprisonment of a year, and not exceeding 10 years.
Cathy Estavillo, Bantay Bigas spokesperson, She expressed fear traders may later on buy palay at P16 per kg due to the effects of rainfall in their produce.
In a briefing last Friday, Estavillo said the average palay farmgate prices are P23 per kg for fresh in Isabela and P22 per kg for fresh in Mindoro.
Estavillo said these levels are high since other regions are yet to harvest their rice crops.
A different view
The Samahang Industriya ng Agrikultura (SINAG), expressed support for the issuance of EO 39 saying there is no reason for any rice price increase in the past weeks as there is no shortage of the grain supply in the country.
Jayson Cainglet, SINAG executive director, said that traders only capitalized on the initial public panic created by the statement of the National Food Authority (NFA) that government buffer stock is only good for 1.5 days.
“Our stocks are good to last until the first quarter of next year and we have yet to harvest the expected 7 million metric tons (MT) of rice this harvest season. At any given time, our buffer stock is good for 50 to 60 days, prior to the onset of the harvest season later this month. Farmgate price remains at P24 to 25 per kg and by harvest time by the end of this month, we expect a drop between P1 to P2 per kg; there is really no basis for rice prices to increase,” Cainglet said.
SINAG also said that rice imports that arrived in the country as of August this year hit 2.6 million MT with more expected to arrive until December as the group urged the NFA to start buying palay from local farmers to beef up its buffer stock.
Prevailing prices
Based on public markets monitoring by the DA in the National Capital Region as of Friday, the per kg price of imported rice range from P53 to P65 for special variety; P53 to P56 for premium and; P43 to P52 for well milled.
No data is available on the price of imported regular milled rice.
For local rice, special variety is at P54 to P65 per kg; premium at P48 to P60 per kg; well-milled at P47 to P57 per kg; and regular milled at P42 to P55 per kg.
Compared to the earliest monitoring of the DA for the year, the price of some rice varieties are now higher by P15 per kg at most.
DA’s monitoring as of January 2, price range of imported rice for special variety is at P46 to P54 per kg; premium at P43 to P48 per kg; well-milled at P40 to P44 per kg; and P37 to P38 per kg for regular milled.
Meanwhile, for local rice, special variety is at P48 to P60 per kg; premium at P40 to P48 per kg; well-milled at P38 to P44 per kg; and regular milled at P35 to P40 per kg. – Irma Isip, Angela Celis, Paul Icamina
