The national government must increase the support price of the National Food Authority (NFA) for palay soon, as the prices of fuel and other inputs have gone up in the past 10 years, according to a farmers’ group.
The Philippine Farmers Advisory Board (PFAB) also slammed economic experts in the NFA Council (NFAC) for purportedly using “outdated” data in evaluating proposals to hike the buying price for unmilled rice.
PFAB Chairman Edwin Y. Paraluman, who represents the farmers’ sector in the NFAC, said he questioned the National Economic and Development Authority (Neda) in particular for using the P12-per-kilogram production cost as basis for assessing the NFA’s proposal to hike its buying price to P25 per kg.
“I asked the Neda if the prices of production inputs by rice farmers did not increase in the past 10 years since the buying price of the NFA was raised to P17 in 2008. I also asked them why their cost of production [COP] data is still around P10 to P12 per kg,” Paraluman told the BusinessMirror in an interview.
“The cost of labor has increased, prices of fuel have increased. Do they think our cost of production has remained the same over the past 10 years? Why are they still using data which was [collected] 10 years ago?” he added.
A source privy to the meetings of the NFAC confirmed to the BusinessMirror that economic managers use the P12 per kg COP to evaluate the NFA’s proposal. An official of the Neda confirmed to the BusinessMirror that the agency pegs the production cost of rice at P12 per kg.
“We already requested the Philippine Statistics Authority [PSA] to provide the NFAC through the NFA management with the updated production cost,” the source, who was not authorized to speak on behalf of the NFAC, said.
Deliberations on the NFA’s proposal to increase its support price by P8 per kg have been postponed pending the PSA’s release of the latest data.
Also, economic managers sitting at the NFAC are yet to come up with their study on the impact of hiking the NFA’s palay-buying price on inflation.
During a February hearing at the House of Representatives, the Neda vowed to come up with a study on the “ideal level” of support price for palay.
The study would be conducted by the interagency Food Security Committee chaired by the Neda and members including the Departments of Agriculture, Finance, Trade and Industry and the Bangko Sentral ng Pilipinas, the source said.
‘Breakeven’
Paraluman pegged the cost of producing a kilogram of unmilled rice at P17 per kg. “The current buying price of NFA at P17 per kg allows farmers producing 80 cavans, or 4 metric tons (MT), to 90 cavans (4.5 MT) of paddy rice to break even, based on our computations.”
“Our average production is just around 80 cavans per hectare. So we are just within the breakeven level. That is why it is really urgent to increase the buying price of palay. The current price has been in effect for 10 years already,” he added.
The latest available data from the PSA showed that the average cost of producing a kilogram of palay last year was pegged at P12.31, 2.84 percent higher than the P11.97 COP recorded in 2015.
Due to the “uncompetitive” support price of the NFA for palay, Paraluman said the food agency was unable to make use its entire procurement budget of P7 billion for this year.
“The NFA has a budget of P7 billion that should be used solely for procuring palay from farmers. Right now, the NFA was only able to use around P1.8 billion because it cannot buy palay from farmers,” Paraluman said.
Paraluman said he would appeal anew in the next NFAC meeting to approve the NFA’s proposal to increase its buying price so that the agency could use its remaining procurement budget.
“Congress could question the NFA why they sought for a budget which they cannot use. The NFA would be forced to return the remaining money,” he said.
The NFAC member also questioned the claim of economic managers that increasing the buying price of the NFA would accelerate inflation.
“They have been saying that a higher support price would be inflationary. But why did the retail prices of rice continue to increase even if the buying price of the NFA is just P17?” Paraluman said. “Traders are now buying at a minimum of P22 per kg.”
The Neda has already expressed its opposition to the NFA’s proposal to hike the support price for palay by P8 per kg.
Neda Undersecretary for Policy and Planning Rosemarie G. Edillon and Regional Development Office Assistant Secretary Mercedita A. Sombilla said increasing the procurement price to P25 per kg, from P17 per kg will accelerate inflation.
“The cost is obvious: inflation and NFA debt pileup but the benefits are unclear. We will ask for an intensive cost-benefit analysis first before we can agree [to the increase in buying price],” Edillon said.
She added that, during a recent meeting with rice traders, the private rice traders informed the government that should the NFA hike its support price, they will follow suit.
“This means that the NFA will still not be able to get a big market share, but for sure, the price of rice will really go up. And since rice has a big weight in the consumer basket, then yes, [it will result in] high inflation,” Edillon said.