THE National Food Authority (NFA) is proposing to increase, to at least P33 per kilogram (kg), the price of locally produced rice it sells in order to cut the losses it incurs from its ballooning operating costs.
NFA OIC-Administrator Tomas R. Escarez said the food agency is losing P8 for every kg of rice it sells at P25 per kg to authorized retailers. This has been the case since the NFA started to buy palay at P20.70 per kg last month, according to Escarez.
The NFA spends an additional P12.30 per kg to mill, transport and market the local palay it procures. This, according to Escarez, doesn’t even include the P2/kg overhead costs being shouldered by the NFA.
“We buy [palay] at P20.70 per kg and, considering the 65-percent milling recovery rate, processing fee, trucking fee and other fees, our breakeven cost would be at P33 per kg,” he said during the Senate hearing on the NFA’s 2019 budget on Monday.
“Our present [selling] price is P25 per kg. This means that we are losing P8 per kg. Our proposal is that the NFA should be able to earn even a slight profit,” Escarez added.
Selling NFA rice at P35 per kg, Escarez said, would cover the overhead costs incurred by the agency.
“Because the accepted retail price right now, and consumers are not complaining, is P38 per kg. The NFA is selling rice at P25 per kg,” he said. “We are proposing to increase the price, at least for locally produced palay, to at least P33 per kg or P35 per kg.”
Escarez also disclosed that he has discussed the proposal with some of the members of the NFA Council, the agency’s highest policy-making body, during “informal talks.”
“It seems they are interested to increase the selling price. I have talked to them in initial meetings that we had. And they are amenable [to the proposal],” he said.
Escarez added that the NFA is also incurring losses from selling imported rice, as the average landed cost per kg of imports is around P26.77 per kg, P1.77 higher than the agency’s minimum selling price.
The NFA sells rice at P25 per kg to retailers, who, in turn, sell it at P27 per kg. It has been the mandate of the NFA to purchase palay at higher prices while selling the staple lower than the prevailing market prices, according to Escarez.
The NFA is effectively purchasing palay at P20.70 per kg following the council’s approval of the P3 buffer-stocking incentive last October. The NFA’s support price for palay is at P17 per kg, with an additional P0.70 incentive.
Escarez told the BusinessMirror that he has already raised the matter with Agriculture Secretary Emmanuel F. Piñol, who also chairs the NFAC. However, Escarez said Piñol told him that the proposal would still have to be discussed thoroughly, especially by the NFAC.
It remains unclear, however, if the NFA would continue to sell government rice once the rice tariffication bill is enacted into law. Escarez said he has received reports that the NFA may stop selling rice once the measure is implemented.
Palay purchases
Escarez disclosed during the Senate budget hearing that the NFA intends to purchase around 723,000 metric tons (MT) of palay next year to achieve its 15-day buffer-stocking requirement.
The volume, according to Escarez, would cost the agency some P14.967 billion, which is more than double than the P7-billion subsidy that the food agency was granted for 2019.
“That’s our intention, to have at least 15 days [of buffer stocking] at any given time and 30 days during the lean season,” he said. “But we are limited in the budget to P7 billion. What we do right now is buy and hope to sell [rice] immediately and then buy again.”
The NFA would need at least 1 million MT to cover the 30-day buffer-stocking requirement during the lean season of July to September, according to Escarez.
However, Senate Committee on Agriculture and Food Chairman Cynthia A. Villar said the NFA’s subsidy for 2019 may no longer be increased.
“It’s unlikely. It would be hard,” Villar told reporters in an interview after the budget hearing.
Villar also said the NFA would be limited to procuring palay from local farmers for buffer-stocking purposes.
The food agency attached to the Department of Agriculture would no longer be allowed to import rice and issue licenses to importers starting next year, Villar said.
Image credits: Nonie Reyes