Zombie

Several areas are reporting shortages of NFA rice. Government, for its part, assures the public of ample supply of the cheap rice varieties stored by the agency.

There is now a confusing contest of explanations about why NFA rice stocks are depleted. Sen. Cynthia Villar offers that some NFA warehouses might have been depleted because rice stocks were dispatched to calamity-hit areas. Sec. Leoncio Evasco assures us there is a “standby order” for 250,000 metric tons of rice to ensure adequate supply.

My own guess is that we are about to see long queues forming composed of people wanting to buy cheaper rice from the NFA. Rice retailers in several public markets are reporting that their stocks of NFA rice will not last a week.

There is a disturbing context to these reports of rice shortages.

First, we have reached the end of the line on the extensions we have been asking for maintaining quantitative restrictions on rice imports. The last extension has expired. Our Congress, however, has been dragging its feet on the law that will enable us to shift to a tariff regime for rice. Without that law, there is confusion in the market.

We need a law not only in imposing tariffs on rice freely imported by traders. More than that, we need a law about what to do with the NFA that now seems a zombie agency, one that refuses to die even if it has outlived its usefulness.

There is no easy solution to this problem and no popularity points to be gained by the politicians. This is why no one, in either chamber, has taken up the cudgels for imposing a new tariff regime on rice and, possibly, abolishing the NFA.

Our politicians would rather look the other way and play other politics games. Meanwhile, the Department of Agriculture, as it has done during the Noynoy years, continues with the charade that we could be rice self-sufficient.

The stage is being set for a serious rice crisis that might finally ruffle the incumbent administration.

Second, the NFA itself has been the site of factional struggle between powerful groups in the Duterte Cabinet.

Secretary to the Cabinet Leoncio Evasco, chair of the NFA Council, is said to prefer that the private sector do the importation. An officer of the NFA, said to be aligned with Evasco, was purged from her post last year.

Presidential Assistant Bong Go, on the other hand, supports NFA administrator Jason Aquino’s position that rice importation be undertaken on a government-to-government basis. No clear policy decision appears to have been taken to settle the contending position.

In such a situation, it should not be surprising if the NFA has been unable to take action to boost stocks of cheap imported rice.

During a press conference called by the NFA yesterday, several surprising things were revealed. NFA Administrator Aquino admits that the “standby order” is exactly that, it is on standby. No approvals have been made for the NFA to actually import the rice stocks.

The NFA, by their estimate, has 32 days of rice stock in their warehouses. If the standby order is approved immediately, it will take at least 45 days for complete procurement and delivery of the imported rice stocks. There will, in the best scenario, about two weeks between when the existing supply is completely depleted and when the new imported stock materializes in NFA storehouses.

The worst case scenario is, of course, if no surplus rice stocks are available at any price in the traditional rice exporting countries. The margin between domestic demand in these countries and the rice available for export is often very thin. The Philippines is the world’s biggest importer of rice, making us vulnerable to foreign as well as domestic cartels.

The situation is disturbing but not alarming. Commercial rice stocks (thanks, in part, to the audacity of rice smugglers) are sufficient to meet demand. Only the poorest consumers in the D and E income categories and a few island provinces are dependent on NFA rice.

But rice prices are bound to rise. The reason why the NFA maintains a subsidized rice stockpile is to exert downward pressure on domestic rice prices. That has come at great cost and the NFA is one of the most indebted agencies.

Palay prices spiked the last few days to about P19 per kilo. Government procurement rules prescribe a maximum palay price of P17. Therefore, government buyers are now effectively barred from competing with private sector buyers for palay.

There being no effective check on palay pricing, and with production costs remaining high, we can expect more expensive rice the coming weeks. That will impact on the inflation rate, of course.

Higher palay prices will bring relief to the farmers. Many of them have abandoned the crop because the government cap on palay prices has made rice cultivation a losing proposition. But consumers must now prepare to pay more for the staple.

The NFA, for its part, can no longer be an effective player in this dire configuration. It is an agency in limbo. Quantitative restrictions have now ended. A law defining a new tariff regime is unavailable. Higher domestic rice prices will make smuggling more enticing.

Through the NFA we sought to defy gravity for decades. We used a bureaucratic instrument to defeat market forces. Now, all the pent up economic pressures will be unleashed.

Spokesman Harry Roque loudly proclaimed the rice situation to be “under control.” But by whom?