By Cai U. Ordinario & Jasper Emmanuel Y. Arcalas
THE implementation of the rice trade liberalization law will not necessarily make imports cheaper, as the projected hike in the demand for the staple could make it more expensive and lead to another price crisis, according to a local agronomist.
The Philippines cannot simply depend on imports, Agriculture Secretary Emmanuel F. Piñol said, as thinning rice supply will not be enough to meet the requirements of the world’s expanding population.
Additional pressure on thinning rice supply, University of the Philippines Los Baños Agriculture Economist Teodoro Mendoza said, could jack up international and domestic prices as the Philippines is one of the biggest rice importers.
Higher demand for rice in countries like Africa, India and China could further exert pressure on international prices and lead to volatility, Mendoza said.
“It has already happened in 2008 when we imported 2.5 million metric tons [MMT]. We were the world’s largest [rice] importer at that time. We also triggered the increase in rice prices which reached $1,000 per metric ton [MT],” he said.
“At that time, our exchange rate was at 47 to the dollar, but now, if rice prices will increase to $1,000 per MT, rice prices, including transportation costs, could reach about P65 per kilogram,” Mendoza added.
Ibon Foundation Executive Director Sonny Africa told the BusinessMirror that, while it is hard to say that rice price crises could ensue after the law becomes effective, it could lead to supply volatility.
“Consumers are now even more vulnerable to price and supply shocks from foreign-exchange movements, unilateral decisions of a handful of major rice exporters, competition in tight global rice markets, and even rice trader exploitation,” Africa said.
Higher MAV
Mendoza said the draft implementing rules and regulation (IRR) released by the National Economic and Development Authority (Neda) on Tuesday, which indicated a possible increase in the minimum access volume (MAV), could be a sign that the government is already anticipating an increase in rice prices.
The draft IRR stated that the Neda, upon the recommendation
of the National Food Authority Council (NFAC), could adjust the MAV. Under the
law, the country’s MAV would return to its 2012 levels at 350,000 MT once the
law
becomes effective. Currently, Mendoza noted that the MAV is at 850,000 MT.
Adjusting the MAV means cheaper rice for consumers, which is crucial especially
during the lean months of July and August.
“They are already anticipating that their base computation of $400 per ton would increase. It has already increased to $480 but by July or August, it could further increase to $700 per ton. If you will impose a 35-percent tariff, that will make rice more expensive,” Mendoza explained to the BusinessMirror.
“But more than that, if we experience a severe El Niño, farmers will not be able to plant in rain-fed areas and even irrigated areas because there could be a water shortage. Water in Metro Manila will be prioritized so the Angat dam cannot release water for farms; the same thing will happen to the Pantabangan Dam in Pampanga,” he added.
Mendoza said the law will eventually discourage farmers from planting rice as prices will go down. He noted that when the President signed the law, the prices of rice already have fallen to around P15 to P17 per kilogram, from P20 per kg.
Once implemented, he said the law will displace some 10 million Filipinos working as farmers and farm hands and other workers in allied industries. This, Mendoza said, could cut rice self-sufficiency level to 70 percent from the current 93 percent.
A 70-percent sufficiency level, he said, translates to 3.5 MMT of rice imports to meet the country’s requirement for rice. Currently, he said, rice consumption per capita stands at 114 kg.
Appeal to farmers
During the Northern Luzon cluster public consultation on the IRR of the Republic Act 11203 on February 26, Piñol appealed to farmers to not abandon their farms once the law takes effect.
“The fear that we will be flooded with imported rice, the moment we open the gates of our country, may be true for the short term,” he said.
“But if the purchases of importers exceed 3 MMT, the price of rice in the world market would shoot up. And imported rice could become more expensive,” Piñol added.
He said the volume of rice traded in the global market is “too thin.” He noted that global rice production is estimated at 800 MMT, of which only 40 MT is exported or traded.
Of the 40 MMT, Piñol said about 37 MMT to 38 MMT is already committed to rice-importing countries, leaving at least 3 MMT for the additional purchases of any other interested country.
“The implementation of the law could send shocks to the local market, such as the decline in prices, due to the entry of imports. But that will not last,” he said.
“The Philippines is growing by at least 2 million annually and that’s a lot of mouths to feed. We cannot solely depend on the world market. Farmers need to continue planting rice. The Department of Agriculture will help them become competitive,” he added.
Image credits: Roy Domingo