The Philippines will once again reclaim its title as one of the top importers of rice this year, thanks to the removal of the quantitative restriction on rice. Traders can now freely import rice following the implementation of Republic Act (RA) 11203,
which removed the QR, starting March 5. Because of this, the United States Department of Agriculture (USDA) projected that the country’s purchases this year will make it the second-largest buyer of the staple, just behind China (See, “Rice imports this year seen reaching 3 MMT,” in the BusinessMirror, June 13, 2019).
The same USDA report noted the increase in traders’ purchases of the staple, particularly from Vietnam, a traditional source of imported rice for the Philippines. More orders could be placed in the coming months, as there is now an incentive for traders to bring in more rice. The National Food Authority (NFA) is no longer selling rice as the new law has reduced its role to buffer stocking.
The entry of more imports will benefit consumers, as this would ensure stable prices. Latest data from the Philippine Statistics Authority showed that despite the end of the harvest season in May, there was no dramatic swing in rice prices. In previous years, the staple becomes more expensive after farmers have harvested their crop. This was not the case this year, as prices remained stable in almost all regions, according to the PSA’s survey of regional centers.
While the data is encouraging for consumers, it does not bode well for local rice planters. In a report, the PSA said the average farm-gate price of unhusked rice fell by 13.7 percent to P18.20 per kilogram, from last year’s P21.08 per kg during the fourth week of May. There are reports that the decline is steeper in some areas, as farmers claimed that traders bought their crop at only P14 per kg. This, at a time when prices should have recovered as farmers have concluded harvest and the El Niño phenomenon slashed output in some rice-producing areas.
By now, the government should have been helping local planters prepare for the influx of rice imports. As it is, the hands of agencies mandated by RA 11203 to help make the sector competitive are tied because the national government has yet to beef up the Rice Competitiveness Enhancement Fund. The RCEF is supposed to be made up of tariffs collected from imports. Pending the collection of these tariffs, the national government has agreed to front-load P10 billion so agencies could start rolling out interventions for the sector.
Delays in implementing the necessary interventions to help planters could drive them away from farming and encourage them to accept construction jobs, which guarantee a minimum wage. Particularly vulnerable are small farmers who are always at the mercy of loan sharks. For a 1-hectare farm, planters need to spend P49,745, according to the latest data from the PSA. To plant twice a year, farmers need to raise some P100,000 for fertilizer, pesticides, hired labor, seeds and other costs.
Raising production capital is particularly difficult for planters tilling a 1-hectare farm, as the return on investment is pegged at P23,000 per cropping season. This is why small farmers turn to loan sharks, so they can continue planting palay. With the NFA now out of the local rice trade and the private sector importing more, planters can no longer rely on the government to help stabilize farm-gate prices.
Allowing more imports via the rice trade liberalization law is good for consumers but could spell doom for farmers, particularly if the government can’t put in place the necessary safety nets. Inflation has eased in recent months and there are indications that it will continue to decelerate as food prices have stabilized. The only way to ensure that inflation will continue to fall within the government’s target is to have a steady supply of staples, which is why we need to strengthen local food production. The Philippines should not just rely on other countries for its food security.