THE National Food Authority (NFA) will maintain its present buying price for palay at P20.70 per kilogram and continue to sell its stocks at P27 per kilogram as ordered by President Duterte under the new rice trade regime, the BusinessMirror learned.
Agriculture Secretary Emmanuel F. Piñol said the NFA will not remove the current P3-per-kilogram buffer stocking incentive (BSI) being offered by the grains agency to farmers selling their produce to the government.
Furthermore, the government will continue to subsidize the sale of NFA rice in the domestic market to keep the staple more affordable to Filipino consumers, he added.
“Also, PRRD [President Rodrigo R. Duterte] has directed me to ensure that the P27-per-kilogram NFA rice is available in the market,” the agriculture chief said in an interview on Sunday.
Under the implementing rules and regulations (IRR) of Republic Act 11203, the NFA may dispose of its stock before its quality “deteriorates/become unacceptable/unsafe” for human consumption.
The National Economic and Development Authority (Neda) interpreted this provision of the IRR to mean that the NFA could sell its stock to the domestic market “at the prevailing market price or even at a slightly lower rate as long as this would cover storage logistics costs.”
Piñol said he is aware that subsidizing the sale of NFA rice in the market would mean additional costs or even losses for the government and emphasized it to Duterte, but the President wanted otherwise.
“I emphasized that to PRRD and he said he was willing to subsidize the NFA rice,” he said.
The IRR has directed the NFA Council to commission a study to determine the grains agency’s optimal buffer stock for emergency and relief purposes no later than December 31, 2019.
Pending the reorganization of the NFA, it must continue to maintain a buffer stock level ranging from 15 to 30 days based on a daily national consumption rate of 32,593 metric tons (MT) per day, Neda said.
In a statement on Sunday, the NFA said it would abide by the provisions of the IRR, which was signed and approved last Friday, and would begin necessary changes to fulfill its new mandate under the new rice trade regime.
However, Raul Q. Montemayor, Federation of Free Farmers Inc. national manager, said the IRR provisions on NFA’s buffer stocking role are still vague.
Montemayor added that “there could be periods wherein NFA will stop releasing rice” in the market since “its stocks are still in good condition and safe to eat.”
“In the same way, NFA may stop procuring at certain periods
when it has sufficient buffer stocks already and is not yet in a position to
release rice,” he told the
Montemayor, who is also the Philippine Council on Agriculture and Fisheries Committee on Staple Chairman, said there were no clear provisions on the NFA’s buying price for palay and selling price of rice.
“[The IRR’s] Rule 220.127.116.11 talks about ensuring NFA’s financial stability, which may mean that NFA will have to buy and sell in a way that will allow it to cover its costs at the very least, meaning with no subsidies from the government,” he said.
Montemayor said rice farmers are clamoring for NFA to hike palay prices to help them recoup expected losses once cheaper imported rice starts to enter the domestic market.
“If NFA tries to match import or market prices for rice, it might incur a loss. But that could be the price to pay during the transition when farmers are not yet competitive,” he said.
“I think NFA will have to maintain a buying program that will prevent palay prices from plunging during the transition. It will not be fair to leave farmers to carry the full burden of liberalization,” he added.
Economist Rolando T. Dy told the BusinessMirror that the NFA should remove its P3-per-kilogram BSI to avoid incurring losses if it continues to sell rice in the domestic market at prevailing retail prices.
“It appears that the buying price may have to come down to a reasonable P17 per kilogram. If not, the government will have to give the NFA subsidies,” Dy, University of Asia and the Pacific’s Center for Food and Agri Business executive director, said.
“The NFA needs to redo its math if it needs to be financially viable under the new market regime,” he added.
Based on his estimates, Dy said it would cost the government at least P4 billion to subsidize the NFA to maintain a 15-day buffer stock.
Dy explained that palay bought by NFA at P20.70 per kilogram would be sold at a retail price of at least P35.22 per kilogram, considering costs incurred in milling, transporting, storage, and distribution.
Last year, the NFA proposed to increase its selling price for rice to at least P33 per kilogram to narrow its losses from selling the staple way below its operating costs since it hiked its buying price to P20.70 per kilogram.
NFA OIC-Administrator Tomas R. Escarez said the food agency is losing P8 for every kilogram of rice it sells at P25 per kilogram to its authorized retailers.
The NFA spends an additional P12.3 per kilogram to mill, transport and market the palay they locally procured, he explained. This, according to Escarez, doesn’t even include the P2-per-kilogram overhead costs being shouldered by the NFA.
Due to this, the NFA, Escarez added, proposed to sell its stocks at P35 per kilogram to breakeven.