Rice industry paralysis

The inadequate analysis brought about by the abruptly terminated Department of Agriculture (DA) rice import investigation has largely caused the industry’s paralysis today.

Monday, 39 farmer organizations announced the start of a Nov. 20 nationwide protest. They stated the 35-percent tariff provided in the rice liberalization law is “too low to protect farmers from drastic price declines … More than 3 million tons of imported rice have [already] entered the country, more than double our import requirements."

With proper analysis, the DA can correct this rate following Article III of the Safeguard Measures Act (RA8800).

Two farmer groups, Federation of Free Farmers and the Alyansa Agrikultura, have already asked the DA for its reasons for terminating the probe, or at least issue the findings it has gathered so far.

Both requests were, however, denied. This directly contradicted Agriculture Secretary Willian Dar’s promise of increased private sector involvement.

But by Nov. 5, Dar ordered the resumption of the rice investigation. This time, he ensured transparency and private sector involvement that had been absent during the initial 30-day investigation.

Following this new DA directive, the table below was submitted by a farmer organization using Philippine Statistics Authority (PSA) data. Information from 2017 is included to show a more normal year than 2018, when the National Food Authority mismanaged importation levels.

The clear conclusion is that farmers are suffering tremendously. Their income is now at just P12,040 a hectare, only 40 percent of the income of P31,760 in 2018 and 46 percent of P25,960 in 2017.

The current level is significantly below the monthly family poverty threshold income of P10,481. The 35-percent tariff is what caused palay prices to decline and compete with cheap imports.

In addition, it was only the traders, not the consumers, who had benefited from the 35-percent tariff. Retail prices decreased by only 15 percent and 1 percent, compared to the palay price decreases of 32 percent and 22 percent.

The past 2:1 ratio of wholesale to palay price has become increasingly exploitative, hitting 2.2:1 in 2017, 2.4:1 in 2018, and 2.7:1 in 2019.

Government action must now be taken against the cartels and price manipulators responsible for all this.

Given Dar’s direction and using available government data (but with reservations, considering there are more recent methodologies and updated information that we have requested but not yet received), we have computed that an 86-percent tariff rate would allow the domestic price to keep up with the imported landed price.

Two years earlier, we cited a Philippine Rice Research Institute study that showed 53 (or 65 percent) of our rice producing provinces would not survive the 35-percent tariff. This was ignored.

The PhilRice forecast of farmers’ suffering has been proven correct.

DA must now exercise its option of tweaking the rate.

Since the slowing inflation was cited as the possible reason for the investigation’s termination, we calculated the estimated impact of the 86-percent tariff at 1.3-percent inflation.

We used a government guideline of 0.16-percent overall inflation increase for every peso increase in rice prices. But if government influences the wholesale-palay price ratio of 2.4:1, the inflation increase will only be 0.5 percent.

The estimates were well within the 2-4 percent government inflation target for the year, considering inflation was only 0.8 percent as of October. (Note: contrary to popular perception, PSA records showed that rice accounted for only 10 percent of the 2018 inflation increase and 9 percent of the 2019 decrease).

Because 11 million rice household members are suffering from poor governance, the DA must now complete the rice investigation. With the correct analysis and following RA 8800, the DA must immediately implement the correct rice tariff to prevent this rice paralysis from turning into a national crisis.