State auditors who combed through the financial report of the National Food Authority for 2017 were rightfully concerned about their findings. In a report, the Commission on Audit (COA) said the NFA used P5.1 billion of its budget for palay procurement to pay off its maturing obligations, which may have compromised its food-security programs. Only a fraction of the budget given by Congress for the palay procurement program was used by the food agency, based on the BusinessMirror’s computation, as the NFA was only able to buy 28,000 metric tons (MT) of palay.
Based on the BusinessMirror’s computation, the misallocated P5.1 billion would have enabled the NFA to buy some 300,000 MT of unmilled rice from farmers last year. At a milling recovery rate of 65 percent, this would have beefed up the NFA’s stockpile by 195,000 MT. The volume is enough to feed the entire Philippines for six days, at a daily consumption rate of 31,000 MT. But because it could not buy more palay from farmers, the NFA was forced to import rice.
In its rejoinder, the NFA said it could not buy more rice from farmers because traders bought their crop at a higher price. The food agency’s support price was pegged at P17 per kilogram, but data from the Philippine Statistics Authority showed that traders bought rice at P18 to P19 per kg last year. This prompted the NFA to again call for an increase in its buying price, a proposal that was rejected again and again by leaders who could not make up their minds when it comes to the country’s food-security programs. Because the support price remained at P17 per kg, the NFA again failed to buy more from farmers this year.
But while the support price is fixed, there is nothing that stops the NFA from offering incentives and coming up with other schemes that would entice farmers to sell their palay to the food agency. This was the argument put forward by the COA, and the NFA has yet to adequately explain why it prioritized its maturing obligations over the procurement of locally grown rice.
While it may appear to be more expensive, the palay procurement program should be the NFA’s priority over imports. The President himself has said that the food-security programs of the NFA are supported by taxpayers’ money, and it will be better for the government to subsidize Filipino farmers than supporting rice farmers from Vietnam and Thailand. And while importation is “easier” and appears to be cost-efficient, it will be more expensive in the long run because it will inflate the NFA’s debt, which has breached P150 billion, and make local farmers uncompetitive.
When it was created in 1972 by virtue of Presidential Decree 4, the NFA’s primary mandate was to promote the integrated growth and development of the grains industry covering rice, corn, feed grains and other grains like sorghum, mongo and peanut. Its raison d’etre, therefore, is to help Filipino rice farmers.
The former chairman of the NFA Council called for an audit of the food agency’s operations. This must be done before the Philippines converts its quantitative restriction on rice into tariffs. A comprehensive audit of the NFA’s operations would be a good starting point to determine how the food agency would figure out in a post-QR regime.