Combating the rice crisis
Another rice crisis recently emerged as the cost of rice soared due to various reasons. This problem is underscored by a troubling statistic—in September, the cost of rice increased by 17.9 percent, reaching its highest point in 14 years, contributing 2.8 percent to the whole inflation rate for that month. This increase put significant financial pressure on Filipino families’ budgets, 13.1 percent of which accounts for rice, and more difficult for poor households who spend up to 30 percent of their income on rice.
The nature and causes of the current rice crisis are multifaceted, with several key factors at play. Extreme weather conditions, including typhoons and droughts, have affected local rice production, leading to lower yields and reduced supply. Concurrently, distribution gaps disrupted the market availability of rice. This issue was further worsened by high transport costs, primarily driven by the soaring fuel prices resulting from the Ukraine war and the decision of large oil producers to reduce oil output. Additionally, fluctuating international rice prices have had a ripple effect, influencing local prices.
To help stabilize rice prices, we propose the following short- and long-term recommendations for the executive and legislative branches:
Executive. 1. Encourage greater private sector participation in the rice supply chain, particularly conglomerates who can help enhance the efficiency of the rice distribution system essential to fight disruptions that drive up rice prices. These corporations can invest in improving storage facilities, strengthening transportation infrastructure, and establishing direct marketing channels in collaboration with farmers.
2. Closer collaboration between government agencies. For instance, the Department of Agriculture (DA) and the National Food Authority can work together to develop a rice procurement and distribution plan, specifically made for this current crisis, that ensures that farmers get a fair price for their produce and that consumers can buy affordable rice. The DA and the Department of Trade and Industry can also develop a rice market development plan that connects farmers with buyers.
3. Develop more agriculturists, particularly focusing on their role in helping farmers enhance productivity at the farm level which can then help cut rice prices and ensure affordability. Traditional farmers’ hesitance to adopt new agricultural technologies, including fertilizers and hybrid rice varieties, has contributed to the rice crisis.
4. At the local government level, promote a cofinancing mechanism that incentivizes local government units (LGUs) to provide more funding to rice programs. Under cofinancing, each peso an LGU invests in irrigation, post-harvest facilities, or other programs to support rice farmers will receive two to three times more matching fund from the national government.
5. Continue implementing the rice tariffication law (RTL), which was created to combat the rice crisis a few years ago. RTL facilitates the importation of rice, helping offset domestic shortages, and stabilize prices. Moreover, encouraging active participation of the private sector in rice trading promotes market competition and discourages price manipulation.
6. The President should convene and preside over the Legislative-Executive Development Advisory Council, at least monthly, to closely monitor the progress of important bills and effectively address the top concerns of Filipinos such as this rice crisis.
Legislative. 1. Reconsider the proposal to lower the tariff rate on rice from 35 percent to 10 percent. We advocate for a dynamic approach that adjusts tariffs based on international rice market conditions. When global rice prices decline, lowering tariffs can stimulate economic growth and ease consumer burdens. However, it is crucial to recognize the inherent volatility of international rice prices. If prices trend upward again, we must be prepared to reinstate higher tariffs to protect domestic farmers.
2. Amend the Comprehensive Agrarian Reform Law. This can promote efficient land use, increased productivity through modernized farming practices, crop diversification, economies of scale through consolidated farms, improved rural infrastructure, better access to credit, market regulation, and comprehensive support for smallholder farmers.
3. Amend the warehouse receipts law. While this applies to all crops, enhancing the efficiency and transparency of warehouses can reduce post-harvest losses and ensure that crops such as rice stocks are stored under optimal conditions.
4. Involve pertinent oversight committees in both the House and Senate. Their oversight and scrutiny will provide an additional layer of accountability, helping to maintain transparency in implementing these measures.
Taking these decisive actions to mitigate the rice crisis is of paramount importance to ensure a sufficient rice supply, proper and efficient rice distribution, stabilize rice prices, manage inflation, and alleviate poverty in the Philippines. When executed in a timely manner, these recommendations will address the current challenges effectively and help avert another rice nightmare in the future.
Gary B. Teves served as finance secretary under the Arroyo administration.
