Our rice buffer stock

Rice is the staple food of Filipinos. Any shortage in rice supply, actual or perceived, always results in a crisis. All past administrations have been hit by a rice crisis. The Duterte administration has already been hit by a mild rice crisis in 2018.

We have periodic rice crises for two reasons. First, we are only about 90 percent self-sufficient in rice production, and we need to import about 10 percent of our annual consumption. Second, we suffer from droughts and typhoons periodically, forcing us to import to cover shortfalls caused by these calamities.

With a population of 110 million and with shrinking rice lands, the Philippines has become the second largest rice-importing country in the world after China. We buy about 85 percent of our imported rice from Vietnam, and the rest from Thailand.

Under the new rice tariffication law (RTL), only the private sector can import rice subject to a 35-percent tariff to protect local farmers. The National Food Authority (NFA) determines the quantity of rice that can be imported. The NFA itself can no longer import or trade in rice, although the government-owned Philippine International Trading Corporation may still do so.

Under the RTL, the NFA is still tasked to maintain the national rice buffer stock. The NFA can source its buffer stock only from local farmers. The NFA is mandated to distribute the buffer stock to local government units (LGUs) and the Department of Social Welfare and Development (DSWD) during emergencies and disasters. The LGUs and the DSWD distribute the rice as a subsidy but must pay the NFA for the rice.

The NFA cannot sell its rice buffer stock to private distributors to intervene in the market even in the event of a rice crisis. Under the RTL, the supply and price of rice are now left largely to market forces.

Under current rules, the NFA is required to maintain a national buffer stock equivalent to 15-30 days of national consumption. This buffer stock does not include rice in the hands of private distributors or households. Last March 28, 2020, the NFA announced that its buffer stock is good for 14 days.

The new policy mandating reliance on market forces assumes the existence of a stable international market for rice. However, the international market for rice has always remained thin, accounting for only 5 to 7 percent of total world production. There are only five significant rice exporting countries, and of these only three export the rice variety Filipinos consume. The international rice market is easily destabilized even if only one exporting country reduces its exports.

There are, more importantly, two new developments that adversely affect the supply of rice in the international market. First, climate change is projected to reduce substantially the production of rice in countries that rely on the Mekong River for water, like Vietnam and Thailand. With El Niño, La Niña and salt-water intrusion, rice production in the Mekong River Delta of Vietnam is projected to decline over the next three decades by 40 to 60 percent. Moreover, China is taking more water from its Lancang River that feeds into the Mekong River.

Second, the global spread of COVID-19 will constrain the international supply of rice as all rice-consuming countries will build up their buffer stocks. Already, Vietnam has announced a moratorium on new rice export sales as it determines what it needs to conserve in the light of the COVID-19 crisis.

How do we respond to these new developments that adversely affect the supply of rice in the international market? We should build up our rice buffer stock to 90 days. On Aug. 28, 2019, long before the COVID-19 crisis started, Agriculture Secretary William Dar told the Senate: “I am of the belief that the 30-day buffer stock of NFA is not enough. We have to increase the buffer stock from 30 days to 90 days.”

It takes time to build up and warehouse a 90-day rice buffer stock. Our local farmers are legally the only source for the buffer stock. Since they cannot meet current or future demand, the build-up must be done gradually to prevent a price surge. We must act now, as increasing our buffer stock is essential to the nation’s food security.

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