Rice crisis?

Last week Malacañang announced that the National Food Authority (NFA) wanted to import 330,000 metric tons of rice under a government-to-government arrangement, through the Office of the President or its designated agency.

The NFA is reportedly worried that by July, its buffer stock will be down to just 500,000 sacks, equivalent to less than a day of national consumption.

Amid criticism of the plan, the government beat a hasty retreat. This time, it was the NFA’s mother agency, the Department of Agriculture (DA), which announced last Monday that the planned importation had been dropped.

But it was unclear what alternatives the DA and NFA were considering to replenish the depleted buffer.

Especially since (according to the Federation of Free Farmers Cooperatives), the depletion is due to the use of the buffer to sell NFA rice at the heavily subsidized price of P25 a kilo at Kadiwa outlets.

Both the federation’s national manager Raul Montemayor and former DA undersecretary Fermin Adriano told “The Chiefs” this week on Cignal TV’s One News that it is illegal to use the buffer stocks for the Kadiwa program or, for that matter, as rice bonus for NFA employees, which the agency is reportedly planning to do.

The only legal use for buffer stocks, they say, is for release during calamities or emergencies including rice shortages. As President and Agriculture Secretary Bongbong Marcos himself has declared, however, the country has enough rice.

Selling rice at P25 a kilo through the Kadiwa, even when there is no rice shortage, is an artificial path to fulfilling BBM’s campaign “aspiration” of rice at P20 a kilo.

Montemayor points out that to sell rice at P20, the NFA will have to buy palay at P12 to P13 a kilo. He says that at those prices, rice farmers will just give up and look for viable livelihoods.

The cheapest commercial rice available at my favorite wholesaler is P39 a kilo, so BBM’s aspiration is a long way from fulfillment. If the campaign promise is to be delivered through subsidized rice at special outlets, the government should just offer the P20 a kilo rice already. Since it’s subsidized, why not go down to P15? Why not P10?

Because the government, subsidizing beyond its means, is bleeding. Montemayor says that for every kilo of rice sold at P25, the NFA is losing at least P10. The reasonable retail price for this cheap “broken” rice, he says, would be P38 to P39. At this rate, he estimates that the P9 billion NFA budget will be depleted after one or two more Kadiwa selling cycles.

“Nalulugi na ang gobyerno, nauubos pa ang buffer,” he told us.

The NFA is prohibited under Republic Act 11203, the Rice Tariffication or Trade Liberalization Law, from importing rice. But the DA can still import G-to-G through the Philippine International Trading Corp. (PITC), which Adriano says has been done in the past although for other agricultural commodities.

Montemayor points out, however, that under the implementing rules and regulations of RA 11203, the PITC can import rice only if there is a genuine national shortage instead of a buffer deficit. He believes the law needs amendment to give the government more flexibility in averting a rice crisis.

The problematic period for rice supply – with industry players warning of a possible “crisis” – is in the pre-harvest third quarter of the year, when supply is expected to go down to volumes that can meet national demand for only 20 days.

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Last Wednesday, Marcos said he did not see another rice crisis this year, although importation is needed. As of end-March, the country’s rice imports stood at 790,000 MT.

A shortage can be averted through timely and sufficient imports. For those operative words – to ensure that the importation will not be too little, too late like the orders for white refined sugar and onions last year – the orders must be placed now, so that the stocks can be in the country by the third quarter.

But there is no shortage yet, so the PITC cannot step in. Importation is therefore up to the private sector, where the players are profit-driven.

Montemayor notes that there is stiff international competition for imported rice these days amid continuing uncertainties such as still high fertilizer prices due to the Russian invasion of Ukraine and the looming El Niño.

He points out that Indonesia just recently announced it would import two million MT of rice because of El Niño. There are reports that India, the world’s largest rice supplier, as well as the Philippines’ main import sources Vietnam and Thailand might also limit their exports.

Adriano says the government can gather at least the biggest industry players and use “moral suasion” to get them to place their import orders now. He believes these players, who are known in the industry, are reasonable folks who can move to prevent a repeat of the rice crisis in 2018.

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Will the country ever be self-sufficient in its staple?

Considering that rice production resources are not expanding commensurately with population growth, Adriano says the best-case scenario is 90 percent sufficiency and 10 percent importation, like Indonesia.

He points out that Malaysia under Mahathir Mohamad settled for 60 to 65 percent rice sufficiency and the rest importation. Instead Malaysia channeled resources to boosting production of its biggest cash crops, rubber and palm oil, with the proceeds being funneled partly to assist rice farmers.

Montemayor, for his part, commented: “Self-sufficiency? Kayang kaya.”

The rice production deficit, he explains, is only 10 to 15 percent of national demand, which can be met with an additional output of a little over five million MT. The problem, he stresses, is the cost of producing this additional rice. Farmers will need government support to become more competitive if this self-sufficiency target is to be attained.

“Itabi muna ang P20 rice (aspiration) and make farmers competitive first,” Montemayor said.