More than two decades after the Philippines put in place a nontariff measure aimed at protecting the rice sector, farmers planting the crop are still unable to compete with their counterparts in Southeast Asia. The cost of producing paddy rice in the Philippines is telling, as it is more expensive compared to Thailand and Vietnam. According to a book published in 2016—Competitiveness of Philippine Rice in Asia—the cost of producing paddy rice in irrigated areas was more expensive compared with Thailand and Vietnam. A kilogram of unmilled rice would cost Filipino farmers P12.41 to produce, nearly double the P6.53/kg recorded in Vietnam, according to the book published by the International Rice Research Institute, Philippine Rice Research Institute and the Department of Agriculture (DA).
Twenty two years would have been enough to implement the necessary mechanisms to help farmers prepare for the day when the government would have to let go of the quantitative restriction on rice. But the hard decisions were not made; so the current administration is forced to play catch-up in terms of cushioning the impact of its removal on farmers and the industry. Unfortunately, the problems created by the complacency of past administrations cannot be remedied in just one year. And even then, the current administration lost the sense of urgency required to prepare farmers, busy as it is in managing inflation caused by high rice prices and plugging the production shortfall in the past two years.
The decision to allow the National Food Authority to continue buying unmilled local rice at P20.70/kg is a good move because it would at least give planters some shield from the storm created by the deluge of rice imports (See, “NFA to keep palay buying price at P20.70 a kilo, says DA chief,” in the BusinessMirror, April 8, 2019). The rice trade liberalization law reduced the NFA’s role to a mere buffer-stocking agency. Under the implementing rules and regulations (IRR), the NFA is required to have an inventory of 15 to 30 days worth of national consumption, which is anywhere from 465,000 metric tons to 930,000 MT.
But the NFA can no longer sell low-cost rice to the public. This means that the food agency can only buy as much as 930,000 MT from farmers this year, or nearly 5 percent of the target output of 20 million metric tons. Based on the BusinessMirror’s computation using the average paddy production of 4 MT per hectare, this scheme would benefit some 233,000 small farm holders. But there are about 2 million other rice farmers who will be at the mercy of traders, particularly during harvest, when farm-gate prices usually decline.
Unfortunately for the other planters, the cost of producing rice has not gone down. And the magnitude of the losses they will incur will depend largely on how soon the government can roll out interventions to help them cope with the drop in farm-gate prices. Following the signing of the rice trade liberalization bill into law, the market reacted immediately as traders slashed their buying price for paddy in February. What complicated matters for farmers was that harvest has already started in some rice-producing areas.
Immediate attention must be accorded to interventions that will make rice farming competitive and profitable. This is not a simple task, and the government needs to act now if it wants to encourage farmers to continue planting rice. The government can look at what Vietnam did to boost rice production. Aside from providing subsidies to farmers, Hanoi also reduced input costs and poured money on farm infrastructure, irrigation projects, and research and development.
It would do well for the government to remember that rice accounts for about 15 percent of total agriculture output. This is because rice is the preferred crop of many farmers not only because it is the staple food of Filipinos but also because they can earn after three months. There is simply no incentive for farmers to shift to other long-gestating high-value crops because they need to pay their loans and they need to feed their families.
While it is true that the Philippines does not have something like the Mekong River that can irrigate vast tracts of land in Vietnam, the government cannot just rely on imports. Ensuring the country’s food security is not the responsibility of other countries. It rests on the shoulders of its own planters and all concerned government officials, who should initiate the necessary changes in the country’s agricultural policy.