‘Unseen forces’ in rice market?

“Consumers were warned to brace for rice price hikes to P38 per kilo and more (“‘Market forces’ hike price of rice by P2 per kilo,” News, 6/18/14). That could explain why prices reached new highs in May. Millers say the price of palay soared to P25 per kilo and the market responded with a P2- hike. Wholesale prices then had already advanced to P36.62 (regular milled) from P29.80 in May 2013.

Statistics show price levels of locally produced rice have not gone back to the pre-May 2008 level of P21.66; instead they have surpassed the pre-“crisis” levels in the ensuing years. Not in Vietnam and Thailand, where the May 2014 wholesale prices are down: to Dong 7,433/kg ($0.35) from Dong 8,466/kg($0.53)  in Vietnam; and to Baht 10,311/ton ($319) from Baht 23,962/ton ($747) in Thailand (Food and Agriculture Organization, Rome statistics).

Why have prices in the Philippines followed only one direction? Given higher production costs relative to those of our Southeast Asian neighbors, higher domestic prices are given. But the rate of increase is unacceptable. Has the National Food Authority (NFA), by not reducing the price of its imported rice, unwittingly set the stage for another round of increases for locally produced rice?

Imported at the equivalent of P19 (CIF/DDU/kg) or P17.80 (CIF basis)—the cheapest in seven years of buying spree—the  May 2014 procurement of 800,000 tons should have tempered prices; instead it was heralded by price hikes. NFA rice is retailed at a high P25-P32 per kilo. Presumably part of the half-a-million-ton October 2013 contract (25-percent brokens), secured at P20.11 (CIF/DDU/kg), but calculated at P18.70 (CIF) is available in the market. Take note: High quality rice (15-percent brokens) bought May 2014 at a price is cheaper than the 25-percent brokens secured in October 2013; thus, the latter grade if purchased (in May) could have axed another 90 centavos from P17.80.

Why did the NFA discard the usual but plentiful 25-percent brokens? Again, the NFA may have unknowingly opened the opportunity for some to pass on the variety (15 percent) as commercial rice at P38. Too late to reduce the NFA prices? In the red by billions of pesos, and with the prospects at recovery in our lifetime dim, there is no point in high markups.

Why have domestic prices for both imported and locally produced rice moved in only one direction despite factors favoring us? Factors like the modest gains in palay production from 16.2 million MT in 2007 to 18.4 million MT in 2013; massive imports that once earned us an unenviable distinction, rice supply available for food consumption (11,290 million tons) against Thailand’s 7.433 million tons; ample cereal and root crops supply available for food (18.625 million tons), against Thailand’s 10.410 million tons on a per-capita basis (Philippines 196 kilos) against Thailand’s 156 kilos? Is the issue of “higher cost of palay production” or “rice insufficiency” being exaggerated to justify prices to reach new highs?

Unseen “forces” at work? To what realistic levels should production costs settle in preparation for competition in 2017?

—MANUEL Q. BONDAD,

[email protected]