FILIPINOS will grapple with more expensive rice in the coming months as the price of the staple could increase by as much as P6 per kilogram due to higher production costs both locally and internationally.
Agriculture Undersecretary for Policy, Planning and Research Fermin D. Adriano said the price of locally-produced rice may increase by P4 to P6 per kilogram in the fourth quarter as a result of higher production costs and lower output.
Citing an analysis by the Philippine Rice Research Institute, Adriano said local rice farmers are spending more today to produce a kilogram of palay because of more expensive planting inputs, particularly fertilizer, which saw its prices triple on an annual basis, and fuel.
Adriano pointed out that the local rice farmers’ average production cost increased by P3.13 per kilogram. Filipino rice farmers spent on an average P11.52 to produce a kilogram of palay in 2020, based on Philippine Statistics Authority (PSA) data. “[The increase in production cost] will translate to an increase of about P4 to P6 per kilogram,” he told reporters in an interview on Monday.
Adriano said the higher cost of fertilizers forced some farmers to cut on the application of the planting input, which in turn, would result in lower palay yield.
Adriano added that the reduced application of fertilizer by farmers may slash the country’s total palay production this year by 1.1 million metric tons (MMT), which translates to at least 600,000 MT of rice.
The average price of urea (prilled) more than doubled to P2,998.55 per 50-kilogram bag on annual basis while the average price of urea (granular) rose by 164.34 percent year-on-year to P2,960.79 per 50-kilogram bag, government data showed.
Not isolated
Adriano also cautioned that the production challenges are not isolated to the Philippines since other rice-producing countries such as Vietnam and Thailand face the same problems.
However, what is worrisome, according to him, was that rice-exporting countries like Vietnam and Thailand also plan to “cartelize” their exports by raising their prices altogether while other countries are eyeing to limit their outbound shipments. Adriano pointed out that these situations would further put upward pressure on domestic rice prices as bulk of the Philippines’s rice imports come from Vietnam and Thailand.
Adriano added that another factor that could further put pressure on the global rice prices is if wheat-eating countries would shift to eating rice due to global supply problems of wheat caused by the Ukraine-Russia war.
“The P4 to P6 price increase is based on the premise that there is no export ban, but if there is, then we cannot say the extent of the increase in rice prices. International prices are already increasing and if their plans of cartel and export ban push through, then they would increase further,” he said.
The BusinessMirror broke the story last week that domestic rice prices could increase should the plan of Vietnam and Thailand to jointly raise export prices of the staple push through.
Vietnam and Thailand are the top rice suppliers of the country as they account for about 95 percent of annual import volume. Last year, Vietnam exported 2.36 MMT of rice to the Philippines while Thailand shipped over 131,000 MT of rice. (Related story: https://businessmirror.com.ph/2022/05/30/viet-thai-tandem-rice-price-hike-to-hurt-phl/)
Government options
Adriano explained that the government has two options to cushion the impact of various global economic challenges on domestic rice prices: increase local production through subsidy and import rice to plug shortfall in supply.
Adriano said the Philippines may turn to non-traditional sources of imported rice, particularly India, where the export price of rice is even lower compared to Vietnam and Thailand.
“President Duterte made the correct decision to lower rice tariffs, which would benefit imports coming from countries like India,” he said. Duterte through Executive Order 171 extended the uniform 35-percent tariff on imported rice until the end of the year. (Related story: https://businessmirror.com.ph/2022/05/28/palace-eo-extends-lower-tariffs-on-pork-and-rice-until-december/)
Adriano emphasized that rice importation is the government’s “temporary relief” to arrest price spikes in the domestic market due to supply woes. “It is just an emergency solution so people have something to eat. We cannot let our people go hungry,” he said.
Raising productivity
Adriano said raising local rice farmers’ productivity is the other option that the government has on table. But doing so, he said, would require a budget of at least P18 billion to subsidize farmers’ fertilizer costs.
“The government really needs to subsidize the fertilizer or else our production would fall. Like what our agriculture secretary is saying, we have to brace for a looming food crisis,” he said.
Non-government organization Federation of Free Farmers (FFF) earlier estimated that Filipino consumers would have to shell out an additional P190 million per day if rice prices rise by P5 per kilogram due to compounding global factors. The FFF said it would cost the government about P27 billion to P38 billion to subsidize local farmers’ higher expenditure on fertilizer and fuel due to rising global prices.
The United States Department of Agriculture (USDA) earlier projected that the Philippines would remain as the world’s second largest buyer of rice for the fourth consecutive year in 2023 as local production is anticipated to stay flat at 12.4 MMT.
The USDA said the Philippines’s rice imports this year and next year would hit the 3-MMT level. (Related story: https://businessmirror.com.ph/2022/05/16/phl-to-import-more-rice-as-output-to-stay-flat/)
The country’s rice imports in the first quarter surged by almost 70 percent year-on-year to 985,139.995 MT as importers brought in more staple food in anticipation of tighter world supply coupled with lower domestic staple output. (Related story: https://businessmirror.com.ph/2022/04/25/dim-outlook-fuels-phl-rice-imports-surge/)