The Federation of Free Farmers Inc. (FFF) called on the government to look into the marketing and selling practices of traders who are now making a killing out of the relaxation of rules for importing the staple.
A study by the FFF, a copy of which was obtained by the BusinessMirror, showed the supposed huge discrepancy between the landed and retail prices of imported rice. The results of the study, FFF said, indicate that certain players are raking in huge profits from cheap imports.
“The data shows a huge gap of P18 per kilogram between declared import prices of rice and prevailing retail prices in July 2019,” read the paper, which was submitted to Agriculture Secretary William D. Dar last week.
Using publicly available government data, the FFF computed the difference between the landed cost of imported rice and its retail price. The group found that the average retail price of regular-milled rice in July was at P38.72 per kilogram, P18.11 more than its import price of P20.61 per kg.
The FFF study also showed that there was a P18.93 difference between the average retail price of well-milled rice at P43.10 per kg and its import value of P24.17 per kg.
“The big gap between import and retail prices suggests that importers, wholesalers and retailer can still enjoy reasonable profits even if retail prices are brought down,” the group said.
The local rice market is no longer regulated by the government after Republic Act 11203 took effect on March 5. Currently, traders are only required to secure sanitary and phytosanitary import clearance and pay the corresponding tariffs if they want to buy rice from abroad.
Detailed analysis
Due to these findings, the FFF urged the government to undertake a detailed study of the cost components of imported rice plus the additional costs and trading margins to determine the “reasonable” retail price.
With this, FFF argued, the government would be able to pinpoint those who are taking advantage of the relaxed rules and earning huge profits.
“It would therefore be helpful if costs and trading margins throughout the rice value chain can be computed so as to determine a reasonable retail price level for imported rice based on a declared FOB [freight-on-board] value,” it said.
“This will make it easy to pinpoint segments of the value chain where unreasonable profits are being made, and may guide the government in making the necessary interventions,” it added.
The government could also analyze the relationship between the prevailing farm-gate prices of unhusked rice and retail prices of milled rice to determine if unscrupulous traders are “short-shelling” farmers, FFF said.
FFF added that the study may determine if the plunge in palay prices is “mainly attributable” to the entry of cheap imported rice.
“The big gap between import and retail prices suggests that importers, wholesalers and retailer can still enjoy reasonable profits even if retail prices are brought down,” the group said.
“However, the government should carefully study how this can be done without further exacerbating the problems of palay producers,” it added.
FFF said the implementation of a suggested retail price (SRP) on rice could help pull down prices.
“If, for example, SRPs are imposed, this may be used as a pretext by traders to lower their buying prices even further,” the group said.
“This implies that, as efforts are made to bring down retail prices, these should be complemented by measures that will force importers to declare the true cost and value of the imports, and thereby provide room for local traders to proportionately adjust their buying prices upwards,” it added.