Vested interests in the rice problem

In the past five weeks the price of “palay” has been dropping like a stone that in some areas it is below P10 a kilo and a high of P16 a kilo depending on the moisture and the location of the farms. Meanwhile, the price of rice which was supposed to be going down due to the liberalization of importation due to the “Rice Tariffication Law” have only gone down by P5 a kilo. The rice farmers are complaining that they are losing money as their cost of production is P14 a kilo, and the rice millers/traders are not buying palay as they make more money selling imported rice and storing them in their warehouses. The government is getting the anger of both the rice farmers and the consumers which will affect its credibility and satisfaction rating, and eventually its ability to govern.

The legitimate vested interests are the farmers and the consumers as it affects their livelihood and their cost of living. The vested self-interests are the rice importers/traders, the government officials, the NFA council, the NFA officials and employees, and the politicians. The current situation is benefitting the vested self-interests due to the higher profits, additional bureaucratic power, and political leverage.

The importer traders could have priced the imported rice lower, but since it was hitting P40 a kilo before the liberalized importation, they were slowing down the price reduction by manipulating the supply, warehousing, and distribution. The NFA officials who were unhappy with their loss of power over the importation licensing which they had strongly opposed, and their sizable market power were just too happy to see the failure of the rice tariffication law. The senators and the congressmen who were for or against the rice importation also got what they wanted in the current problem.

Aside from the short-term bad effects to the rice farmers and the consumers, the medium/long term effects are more serious. A prolonged unprofitability of rice farming will increase farm unemployment, reduce rice farming thereby reduce domestic rice supply, and widen the income disparity between the rural and urban areas. For strategic reasons, a major portion of the country’s rice supply has to be sourced domestically and urban and rural income inequality has to be diminished.

So, the government has ordered the NFA and even the local governments to start buying palay of the farmers at a higher price. It has government banks and agencies provide interest free loans to the rice farmers, order the NFA to sell its rice inventories in warehouses, and push the Departmen of Budget and the Department of Agriculture to fast track the implementation of the rice farming subsidy amounting to P10 billion. There are also calls from some politicians to amend or recall the law, which is unlikely to happen as this is part our country’s agreement under the General Agreement on Tariffs and Trade with other countries.

The current moves of the government should have been done earlier but politics was muddling the problem. Now that newly appointed Agriculture Secretary William Dar Is entrenched and the problem has got the attention of Malacañang, things are moving faster. By next week, NFA will flood the market with 3.6 million bags of rice at P27/kg, buy play from the rice farmers at P19/kg and substitute P600 worth of rice for the Pantawid Pamilya Program instead of cash.

There are actually other micro-economic initiatives for this demand and supply rice problem, such as non-tariff restrictions which is practiced by most countries, logistical interventions by a dedicated bureaucracy, and social behavior modification. It is just that the government has not been attracting competent and honest people. This is also the problem in its “Build, Build, Build” program which is suffering from the lack of absorptive capability to implement. I believe Agriculture Secretary Dar may be an exception and will solve this rice problem.