Why BBM can deliver P20 a kilo rice

Economics, not politics, has enabled President Ferdinand R. Marcos Jr. to finally fulfill his campaign promise of P20 per kilo of rice at retail, for the masses.

Of course, good economics makes for good politics. And good politics makes for good governance. Economics, we were told in college, is the maximum utilization of scarce resources for the benefit of the greatest number.

Two major economic fundamentals help explain why rice prices are falling.

One, global rice prices are down – by 22.6 percent on average in one year. Thanks to a global rice surplus. This year, the Philippines expects to harvest 20.45 million tons, up from 19.2 million metric tons of palay in 2024.

The world’s declining rice prices are driven by strong global production and easing of export policies, notably by India.

According to the Food and Agriculture Organization (FAO), the rice price index dropped by 1.7 percent month-on-month (MoM) to 104.1 points in March 25. This is a huge 24.62 percent year-on-year (YoY) decline, highlighting a sustained price since early 2024. The FAO traces the MoM decline to weak import demand and ample exportable supplies.

Two, the price of the benchmark Brent crude has fallen by 33.59 percent from its January 2025 high of $87.95 per barrel to $58.40 by end April. The West Texas Intermediate (WTI), another price benchmark, hit $58.29 a barrel on May 2, 2025 – down 71.5 percent from its peak price of $204.68 in June 2008, and down 27 percent from its May 2024 price of $78.38 per barrel.

Electricity or fuel is a major component of palay production and the retailing of rice. You need diesel to pump water into rice fields. You need electricity to run irrigation dams. Fertilizer and pesticides come from petrochemicals and petrochemicals come from crude oil. Lower crude oil prices have a cascading effect on the cost of producing palay and retailing rice.

The average age of the Filipino farmer is 57. He has been farming for half of his life. About 40 percent went to high school; only 10 percent went to college. Per a 2022 Philippine Statistics Authority study, 22 percent of our farmers use tractors, 15 percent irrigation pumps and 65 percent sprayers. All these machinery need fuel or electricity, which is very expensive when crude oil price is high.

Only 64 percent of farms are irrigated, which requires electricity. About 68 percent of farms use urea fertilizer (88 kilos for every hectare), which comes from crude oil and natural gas. Another 76 percent of farms use pesticides (2.82 liters per hectare), which come from petroleum.

Because farm machinery, fertilizers and pesticides are high cost, 57 percent of farms rely on good weather to have a good harvest. Bad harvest comes from three factors – bad weather, cited by 57 percent of farmers; pests and diseases, 57 percent and inadequate water supply or irrigation, 18 percent.

Goldman Sachs expects Brent oil’s price to average $63 for the rest of 2025 and $58 in 2026, while West Texas Intermediate (WTI), another oil price benchmark, will edge down to $59 in 2025 and $55 in 2026. The bank blames geopolitics and a global daily surplus of 800,000 barrels for the oil price declines.

In January 2025, Goldman Sachs originally expected Brent crude to trade within the $70-$85 per barrel range with a 2025 average of $76. Instead, oil prices went further down, dramatically. In late 2022, Brent crude hit $118 per barrel, then nosedived to $75 in late 2023 and to $79 in 2024. In three years, oil prices have dropped more than 50 percent.

The average cost of producing rice, wholesale regular-milled, was P36.48 in 2023. In palay terms, production cost was P21 to P23 per kilo. Central Visayas (Cebu) has the highest palay and rice production cost – P47.04 per kilo of rice in 2024, and P27 per kilo of palay. By January 2025, the farmgate price of palay fell 17 percent to P20.69 per kilo, thanks to record rice imports.

It’s good that Agriculture Secretary Francis Tiu Laurel launched the rollout of the P20 per kilo government rice in Cebu. Per PSA, Cebu or Central Visayas has the most expensive palay to produce and the highest priced rice. In 2022, the cost of producing palay in Central Visayas was 75 percent higher than the production cost in Central Luzon.

In April 2025, the FAO All Rice Price Index (at 104.9) fell 22.6 percent from its year-ago level, according to the Food and Agriculture Organization. The rice index defied a general increase in average prices of five major commodities – cereals, meat, dairy, vegetable oil and sugar, for the third straight month during the period.

The FAO cereals price index was driven by higher wheat prices. From April 2024’s 111.6 to April 2025’s 111.0, however, the FAO Cereal Price index indicated a decline, thanks to lower rice prices. In the FAO Cereal Price index are wheat, corn, barley, sorghum and four major rice varieties – Indica, Aromatic, Jasponica and glutinous.

In April, our Department of Agriculture (DA) projected lower rice imports this year due to an expected improvement in local production, better weather conditions and higher stock carryover. Imports for 2025 would only be 3.8 million to 4 million tons.

In 2024, the Philippines was the world’s biggest rice importer – 3.8 million metric tons, surpassing the previous record high of 3.83 million MT attained in 2022.

Alongside the large volume of stocks still available from last year’s importation, a DA spokesman said, local production should see better harvest since “we don’t expect any extreme climate conditions.”

This early, I congratulate President BBM for the political will to fulfill a seemingly insane promise, the P20 per kilo rice, and DA chief Francis Tiu Laurel for executing the President’s marching orders.

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