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No Free Lunch

Wild promises and P20 rice

Can a presidential candidate credibly promise rice at P20 a kilo? Last week, Ferdinand “Bongbong” Marcos Jr. made a bold statement that he “plans to bring down the price of rice by P20 to P30 per kilo by recommending a price cap on the staple.” In March, regular milled rice sold at a nationwide average of P38.50 per kilo, ranging from P32 (in Cagayan Valley) to P47 (in Eastern Visayas), based on Philippine Statistics Authority (PSA) data.

Let’s examine the numbers. Given PSA data, his promised P20-30 per kilo reduction in the staple’s price implies a price in the level of P18.50 to as low as P8.50 a kilo for regular milled rice, the rice grade mostly consumed by lower-income groups. Surely, he wasn’t thinking of a price that low; some reports said he mentioned P20/kilo. He couldn’t have been referring to the highest grade of rice (“special”), which PSA says averaged P50.53 per kilo in March, ranging from P43.25 (in the Zamboanga region) to P59 (in Eastern Visayas) — after all, why subsidize the rich who could well afford more expensive rice? (But then again, could his own lifestyle make it the only grade of rice he knows?)

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He may not know that as a rule of thumb, the farm gate price of unmilled palay is about half the retail price of milled rice, given milling recovery efficiency, and costs of milling, transport, and logistics through the supply chain. His promised P20 rice price thus implies a farm gate palay price of about P10 per kilo — well below the P12 to P15 farmers cite as their production cost. No wonder farmers’ groups aren’t jumping for joy over his P20 promise. But he also promises to issue an executive order directing the Department of Agriculture and the National Food Authority to procure rice harvests from local farmers “at higher and more competitive prices” (impliedly, beyond their levels now). Good luck.

He also seems to forget that the price of rice even in our best rice-growing neighbors is now moving beyond his P20 target, amidst surging fertilizer prices coupled with supply shortages and price hikes in other grains, all due to the Russia-Ukraine war. Hence, promising P20 rice at this time is not only reckless; it’s outlandish. It could only mean that general taxpayers will pay for nearly half the costs of rice farmers! Under a tax system long known to be regressive (one that’s a heavier burden on the poor than on the rich), this subsidy is actually worse than letting everyone pay for higher-cost rice to begin with. At least we’d avoid the massive costs of administering the subsidy, not to mention the money that will go into the wrong pockets in the process.

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To top it all, he vows to amend the rice tariffication law, implying a return to state-controlled rice imports, which is precisely what allowed our rice prices to move further and further away from and much higher than in our neighbors through the years. Thus, will he negate the Duterte administration’s game-changing reform meant to force us to finally help our farmers right, via nurturing for greater productivity and competitiveness, not insulating and “protecting” them from competition? It’s in fact that same import competition that could be his best bet for moving toward P20 per kilo rice, by forcing us to shape up and work to bring down the production cost of rice closer to it.

Marcos Jr.’s numbers and other promised measures give him away on several worrying weaknesses: careless use of numbers that make no sense; being out of touch with realities on the ground; complete disregard for fiscal responsibility and proclivity for massive borrowing to finance ambitious promises (a la Marcos Sr.); lack of understanding of basic economics—including the principle embodied in the very name of this column—which would have come naturally with a genuine Oxford degree; and a penchant for making what the National Federation of Peasant Women describes as “motherhood statements para makakuha ng boto (to gain votes).”

What I see here is a mind so confused and out of touch, he knows not what he speaks. In trying to sweet-talk both rice consumers and producers, he will end up helping neither. And that, my friends, would be a dangerous leader.

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TAGS: 20-peso rice, Cielito F. Habito, No Free Lunch, wild promises
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