As rice eats up a big chunk of a household’s budget due to inflation, importing cheaper rice slapped with tariffs may be the best instant solution to bring down prices and reduce corruption on rice imports. But the government must not stop here. It has to solve bigger problems like neutralizing cartels and helping farmers.
On the economic law of comparative advantages, it makes no sense to aim for rice self-sufficiency when Thailand, Vietnam and Myanmar, naturally blest with Mekong River irrigation, can produce rice at P6 to P7/kilo against our P12/kilo production cost. Why produce if it’s cheaper to import? So the logic is to let the free market take over.
Unable to produce enough anyway, let’s import cheap rice, but impose tariffs to equalize prices and prevent any import deluge that may dampen local rice prices and kill local producers. What is crucial is setting the right tariffs, given certain volumes and seasons.
Free entry, but with countervailing tariffs, allows anyone to import, and will spare the government (i.e, the National Food Authority) of suspicions of corruption as it intervenes either as a direct importer or the grantor of import permits.
Overhaul NFA? Perhaps, it is high time to accept the grain of truth that the NFA is a born loser as it tends to buy high when farm prices are high, stores rice at the risk stocks rotting in its warehouses; then sells low when prices are high. Thus, it has accumulated debts of about P170 billion.
On palay procurement, records show that its procurement from 2013 to 2017 was a mere 0.8 percent of total palay production, which is negligible to influence market prices. In fact, in the past year its farm support price of P17/kilo was ridiculously lower than farm prices of P18 to P21/kilo, which means farmers sell better to traders.
Why not entertain rice options. Another viable alternative for the NFA is to develop a financial instrument we can call a “rice option,” which is a form of term insurance with corresponding amounts granted to big farmer organizations and trader-miller-wholesalers, contracted to deliver stocks at discounted prices when the NFA needs them for emergency, buffer stock management and price stabilization.
The objective is for the NFA to ensure the availability of stocks for sale in the open market, because the slightest inkling people think there is a rice shortage, traders and consumers may start panicking and hoarding, thus triggering a shortage even when stocks are abundant.
Boost agri by empowering farmers. We often blame nature’s wrath for agriculture’s dismal performance, but with technologies and planning we can minimize the effects of the yearly 21 typhoons. Farmers need to be empowered through cooperatives and equipped with trucks, postharvest facilities funded by long-tem credit. Farmers would want to produce more, which can mean more variety and cheaper prices.
Unfortunately, traders and middlemen meddle with the farmer-consumer relationship. Thus, a trader given a choice between trucking 10 tons of vegetables a day and 100 tons a day but earning the same, a trader will logically choose 10 tons a day.
A trader has no loyalty to production, and his master is profit or higher margins. Given a chance to earn more from imports, he won’t hesitate.
In contrast, a farmer will go for 100 tons a day, which means 10 times more output, 10 times more jobs, 10 times more packing, 10 times more storage and 10 times more trucking.
Invest where it counts most. If investments in NFA only go to waste, better invest where it will count most by investing in farmer organizations, farm mechanization, logistics, technology transfers and education. This is how you beat the trade cartels.
Farmers need to be organized and funded with concessional credit in direct tieups with new markets in urban centers. It is lamentable that with 310 small countryside banks closed from 2000 to June 2017 or 20 small banks closed every year, credit to agriculture has dropped. Sadly, the commercial banks replacing them do not lend much to farmers.
Farmers—currently averaging 59 years old—are now recipients of dole outs like beggars, instead of dignified borrowers. I remember years back when the Federation of Benguet Farmers brought goods five times to Metro Manila only to be dumped by competing cartels, resulting in losses of about P100,000 each time.
The government’s direct intervention may only amount to 5 percent in terms of impact to the agriculture sector. But with the right policies adopted, this will help the agriculture sector to perform better.
E-mail: mikealunan@yahoo.com