Surging rice prices

The Duterte administration has found itself receiving sustained flak for its seemingly shortsighted policies that have led to the higher prices of goods and services every Filipino household must contend with today. Indeed, while a substantial portion of the cost increases is caused by a factor beyond their control—international crude oil prices—the administration’s policymakers have basically amplified its effects with a broad tax hike package and the failure to temper inflationary effects with an early tightening of monetary policy.

But there are other systemic issues that are contributing as much, if not more, to the problematic situation.

A cursory glance at the inflation data will show that what’s making it more difficult for Filipinos to make ends meet, especially those at the poorer end of society, is the sharp spike in food prices. Rice, in particular, is a major driver of the country’s inflation rate, which stands at a five-year high of
5.2 percent as of June.

Official data show that prices of various rice varieties have risen anywhere between 5.5 and 7.1 percent on an annual basis. Measured from week to week, rice prices have been on an uptrend for at least 23 weeks now. That’s almost six months of uninterrupted price increases for an item that constitutes the staple food of Filipinos.

Yet this phenomenon is not unknown to policymakers. Sudden rice shortages in the marketplace happen every few years. And, almost like clockwork, every presidential administration has had to deal with at least one rice “crisis” during its watch.

It is difficult to prove, but there is a lingering suspicion among some reform-minded people in government that these periodic rice shortages are artificial in nature, created by big rice traders who tighten supply lines during critical periods to push prices higher and make hundreds of millions of pesos in extra profit in the process.

The story is the same every time: Prices go up, Malacañang approves a large batch of rice imports to address the supposed shortage, and one can imagine rice traders (and possibly their cohorts in the government bureaucracy) laughing all the way to the bank.

There is a solution on the table that may not only remedy the current rice shortage, but also prevent whatever artificial schemes may be behind it. The so-called rice tariffication proposal calls for decisions about the importation of rice to be taken away from the hands of government and left to the market forces of supply and demand.

While the Duterte administration regulates how much rice can be imported, ostensibly to help protect local rice farmers and promote self-sufficiency, this system, unfortunately, can be gamed by unscrupulous traders to their advantage. To say that this, in fact, appears to be happening, given the anomalous market movements, is not a farfetched supposition.

But by eliminating government’s control over the volume of rice imports and shifting it to a tariff that will be levied on all rice bought from abroad, the power will shift to Filipino consumers who will, as a group, be able to control its market price basically on the strength of how much they consume the staple.

Rice tariffication has been on the table for several years now, but no administration has been able to summon enough political will to go up against entrenched, powerful and wealthy interests in the local rice industry. No administration as well has been able to look at Filipino farmers in the eye and tell them straight up that it’s time to emerge from decades of being sheltered by the government’s protectionist policies.

The Duterte administration prides itself on a chief executive with a penchant for doing things long thought to be impossible, especially vis-à-vis influential businessmen. Perhaps the time is ripe to implement the one solution that will finally end shortages of rice stock, and thereby bring a measure of relief to Filipino homes made hungry by the continuing surge in rice prices.